#日本央行加息至1.25%创31年新高 #Gate广场中秋团圆局 31-year high! Japan makes a major move! How significant is the impact?

The Bank of Japan raises interest rates to a 31-year high!
On September 18, the Bank of Japan raised its benchmark interest rate from 1% to 1.25%, in line with expectations and reaching a 31-year high. The vote was 7:2. After the result was announced, the dollar/yen pair surged rapidly in the short term.
The Bank of Japan said it would implement monetary policy as appropriate from the perspective of sustainably and stably achieving its inflation target. It will assess the impact of the situation in the Middle East, AI demand, and foreign exchange on the economy and prices when formulating policy. It will continue raising interest rates based on economic and price developments and financial conditions.
Japan raises interest ratesAt 9:18 a.m. Beijing time on September 18, the Bank of Japan raised rates at the fastest pace in 36 years to address intensifying inflation.
The Bank of Japan said in a statement after its two-day meeting ended on Friday that it would raise its policy rate by 25 basis points to 1.25%. This rate hike came after the shortest interval since the June hike and was the first of its kind since 1990. The interest rate reached a 31-year high.
After the interest-rate decision was announced, the yen depreciated rapidly. The Bank of Japan said it would continue raising rates based on economic and price conditions. Price trends are expected to align with the target between the second half of fiscal 2026 and fiscal 2027. There is a risk that price trends could deviate and exceed the target.

The situation in the Middle East, AI, and exchange rates are factors to consider when assessing the timing of the next rate hike.
Stabilizing price trends around 2% is crucial. Japan’s financial conditions have remained accommodative and will continue to do so. The bank believes CPI is highly likely to accelerate significantly to above 2% in the second half of fiscal 2026. BOJ Governor Kazuo Ueda will usually explain the considerations behind this decision and the interest-rate path over the coming months at a press conference. The foreign-exchange market has shifted its focus from “whether rates will be raised” to “how many more hikes will follow.”
Several institutions believe that unless the Bank of Japan signals a stronger tightening stance than currently expected, the yen could instead continue weakening after the decision. A Reuters poll showed that the market broadly expects rates to continue rising, reaching 1.5% by the end of March 2027 and 1.75% in the second quarter.

The swap market has almost fully priced it in
On the eve of the BOJ’s latest rate decision, FX strategists broadly expected “a rate hike is easy, but striking a hawkish tone is difficult,” with the yen biased toward short-term depreciation. Swap-market data had almost fully priced in a 25-basis-point hike. Wells Fargo strategist Chidu Narayanan said the bar for the BOJ to meet or exceed the market’s “hawkish expectations” was very high; if the meeting outcome delivered only a rate hike without signaling continued tightening, the risks would lean dovish, and he recommended shorting the yen. Chris Turner, head of G10 FX strategy at ING Bank NV, estimated that if the BOJ failed to signal further rate hikes, the yen could depreciate to 157 or 158 against the dollar, while Citi strategist Daniel Tobon projected that the yen could weaken toward 159 in the coming weeks. Another factor suppressing a yen rebound is the U.S.-Japan rate differential. The Federal Reserve announced a 25-basis-point rate hike on Wednesday, and Waller hinted that inflation remained elevated and that tightening could continue if necessary; the dollar index climbed above 100, while short-term U.S. Treasury yields rose. However, strategists’ medium- and long-term views diverged. Citi believes Japan’s recent exchange-rate and monetary-policy adjustments are part of a structural shift that will remain favorable for the yen over the long term; Georgette Boele, a senior FX strategist at the Dutch bank, expects energy prices to temporarily curb the rebound, with the dollar/yen trading around 154 before the first quarter of 2027 and strengthening only in the second half of 2027 as the Federal Reserve and European Central Bank cut rates.

Overall, the short-term market is guarding against a yen pullback under a “dovish rate hike,” with 158–160 a key range to watch. Choi Ji-wook, head of macro strategy for Asia-Pacific at State Street, holds a more bullish view on the yen and rates it “overweight.” He expects the Bank of Japan to continue raising rates in December and next March after lifting them to 1.25% at this meeting, with the terminal rate eventually reaching 1.75%. He believes the dollar/yen exchange rate could rise to 120 yen–130 yen in the medium term, with a three-month target of 152.5 yen.
The “carry-trade unwinding” caused by Japan’s rate hikes is another market focus. According to Jefferies’ analysis of Bank for International Settlements data, cross-border yen borrowing, a proxy for carry trades, had surged to a record 360 trillion yen ($2.35 trillion) as of March, marking the largest carry-trade scale in the past three decades. However, yen shorts may already have reduced their positions. Charu Chanana, chief investment strategist at Saxo Bank, said: “Carry trades are fragile because this unwinding is occurring before the Bank of Japan has delivered the rate hikes expected. Some yen short positions have been reduced, but positioning remains substantial, so further yen strength could turn the gradual reduction in leverage into a faster, self-reinforcing unwinding.”$USDJPY