USD/JPY jumps to 153.90 as BOJ holds rates steady - BBH

USD/JPY rallied to its highest since mid-February after the Bank of Japan delivered a neutral policy hold, keeping rates at 0.50%. While the decision was widely expected, Bank of Japan (BOJ) Governor Ueda signaled a gradual path to rate normalization, keeping the yen under pressure as markets weigh the timing of the next hike, BBH FX analysts report.

BOJ keeps policy rate at 0.50% in 7-2 vote

"USD/JPY rallied to its highest level since mid-February to around 153.90 with the next resistance offered at 155.00. The Bank of Japan (BOJ) delivered a neutral hold. This was in line with market expectations but not our base case scenario (we anticipated a hike or a hawkish hold). The BOJ kept the policy rate at 0.50% (90% priced-in) in a 7-2 majority vote. Like at the last September meeting, BOJ members Takata Hajime and Tamura Naoki, favored a 25bps hike to 0.75%."

"BOJ Governor Kazuo Ueda stuck to the bank's long-held guidance of raising rates if the outlook for economic activity and prices will be realized, adding the likelihood of this outlook materializing is rising gradually. The swaps market continues to see even odds of a December rate hike, with a full 25bps move priced in for January."

"However, there's no strong indication that the BOJ is in a hurry to resume normalizing rates which remains a drag on JPY. First, Ueda warned again that he does not think the possibility of the BOJ falling behind the curve on inflation is high. Second, the BOJ's updated real GDP growth and CPI inflation forecasts are largely unchanged from the previous Outlook Report. Third, the BOJ reiterated that risks to economic activity are skewed to the downside for fiscal 2026 while risks to prices are generally balanced."