BoJ Hikes Rate to 1%, Highest Since 1995, Yen Impact Muted

The Bank of Japan (BoJ) lifted its short-term policy rate to 1% on Tuesday, marking the highest level since 1995 and a milestone in a two-year-old normalization cycle. Despite the historic nature of the move, the yen showed a muted reaction, with USDJPY hovering around the 160 level.

The rate hike, the largest in the current tightening phase, reflects the BoJ's gradual shift away from ultra-loose policy. However, market participants have largely priced in the normalization, limiting the impact on the currency. The yen's subdued response underscores the persistent interest rate differential between Japan and other major economies, particularly the US.