Yen Strengthens, Bonds Fall as Bank of Japan Raises Interest Rates
Following the Bank of Japan's first rate hike since July, the yen gained against the dollar, while government bonds declined.
Key Market Movements:
* Yen rose 0.7% to 155.01 per dollar
* Two-year and five-year government bond yields reached their highest since 2008
* 10-year JGB futures fell 34 ticks to 140.59
* Topix and Nikkei share indexes erased earlier gains
BOJ's Decision:
The interest rate hike was in line with expectations. The central bank expects inflation to accelerate in the coming years and indicated it will continue raising rates if this forecast holds true.
Market Outlook:
Analysts speculate on the timing of the next rate hike. Dovish remarks from Governor Ueda could weaken the yen, prompting Japan to intervene. However, the upward adjustment in inflation expectations may make it challenging for Ueda to maintain a highly dovish stance.
Historical Context:
The rate hike is the third in under a year, bringing it to the highest level since 2008. The market will focus on Ueda's press conference for hints about the pace of future increases.