Bank of Japan raises interest rates to 30-year high, USD/JPY breaks through 157 level, yen suffers heavy losses

The Bank of Japan announced on Friday that it would raise its policy interest rate by 25 basis points to 0.75%, reaching the highest level in thirty years. While this decision was in line with market expectations, it failed to support a strengthening of the yen. Instead, against the backdrop of continued dovish expectations from the Federal Reserve, the US dollar showed strong gains, with USD/JPY soaring 0.85% during European trading hours, approaching the 156.90 level.

Major Currency Performance Comparison

According to real-time data, the yen was the weakest among major currencies. The table below shows the intraday percentage changes of the yen against other major currencies:

Currency Pair Volatility Statistics:

• Yen vs USD: -0.82%
• Yen vs EUR: -0.72%
• Yen vs GBP: -0.78%
• Yen vs CAD (reference for CAD instructions): -0.72%
• Yen vs Canadian Dollar: -0.73%
• Yen vs AUD: -0.40%
• Yen vs CHF: -0.63%

This currency heatmap clearly reflects the yen’s weakness as the base currency. Selecting the yen in the left column and moving horizontally to the USD column shows the corresponding percentage change representing the depreciation of the yen against the USD (JPY/USD).

Ambiguous Signals from Central Bank Policy

Bank of Japan Governor Kazuo Ueda stated at a press conference, “If economic and price data align with forecasts, the central bank will continue to advance the policy rate increases.” However, the market remains confused about when and by how much the rate hike will occur in 2026. This lack of clear forward guidance has been a key factor in pressuring the yen lower.

Although recent remarks from central bank officials indicate confidence that inflation will remain close to the 2% target, investors remain uncertain about the pace of future rate hikes.

US Dollar Index Hits Weekly High, Continuing Strength

In contrast, the US dollar has performed quite strongly. The US Dollar Index (DXY) hit a new high for the week at close to 98.65 at the time of writing. Despite a modest slowdown in US November inflation data, the dollar’s upward trend continues, supported by market expectations of a less hawkish stance from the Federal Reserve at the January meeting.

This pattern suggests that the dollar’s strength is unlikely to be challenged in the short term, while the yen’s weakness is expected to persist.