The Bank of Japan announced a 25-basis-point rate hike today—coming just three months after its last increase—signaling that it is raising its benchmark interest rate at the fastest pace in 36 years to combat mounting inflation.
Following a two-day meeting, the central bank announced it was raising its policy rate by 25 basis points to 1.25%. This move was in line with the expectations of all economists surveyed by Bloomberg. Given that the Bank of Japan had previously raised rates in June, this marks the shortest interval between two rate hikes since 1990.
However, following the news of the rate hike, the yen depreciated rather than appreciated, at one point plunging 0.57% intraday to 156.86 against the dollar. Market analysts attributed the yen’s decline to the Bank of Japan’s forward guidance, which appeared largely unchanged from July and did not signal a significant shift toward a more hawkish stance.