BOJ Hikes; Yen Weakens Past 157 as Two Members Dissent
The Bank of Japan raised its policy rate by 25 basis points this morning. The new rate is 1.25%, the highest in 31 years. The vote was 7-2.
The two dissenters, Toichiro Asada and Ayano Sato, were both appointed this year by Prime Minister Sanae Takaichi.
The textbook says the yen should have firmed here. It did the opposite. Dollar-yen pushed above 157, and the two-year Japanese government bond yield fell 2.5 basis points to 1.835%.
The yen priced the 7-2 vote, not the 1.25%.
Kazuo Ueda did not change that. He said there is no preset pace for further increases and that the timing depends on inflation and the economy.
For a US reader the takeaway is this: two central banks tightened in one week, and the dollar won both times. The dollar index climbed to 100.50, above the seven-week high it set yesterday. The 10-year Treasury yield is at 4.98%, three basis points above Thursday's close.
Asia rose overnight and Europe fell. The Nikkei closed up 1.4%, the Kospi in Seoul up 2.7% and Shanghai up 0.9%. In Europe the DAX is down 1.1%, the FTSE 100 down 1.0% and the Euro Stoxx 50 down 1.2%.
The second story is oil. Brent is down for a third straight session, trading near $103 and well off the four-month high of $106 it hit on Tuesday. US crude briefly traded below $100.