Yen Sinks After Bank of Japan Holds Rates Markets Left Wanting More

Highlights:

• The Japanese yen weakened sharply against the U.S. dollar, trading around ¥154.08 at the time of writing, after the Bank of Japan (BoJ) kept rates unchanged and adopted a less hawkish tone than markets expected.
• BoJ Governor Kazuo Ueda hinted that a rate hike could come as soon as December, depending on wage and inflation data, but offered no clear timeline, disappointing yen bulls.
• The U.S. dollar gained after Federal Reserve Chair Jerome Powell said a December rate cut was not guaranteed, widening the policy divergence between the Fed and the BoJ and pressuring the yen further.

BoJ holds steady; hawkish hint disappoints traders

At the time of writing, the Japanese yen fell sharply against the U.S. dollar after the Bank of Japan (BoJ) kept its short-term policy rate unchanged, signaling a possible rate hike in December, but offering little concrete timeline — a tone that flummoxed currency markets.

Fed hawkishness adds downward pressure on the yen

Meanwhile, the Federal Reserve Chair, Jerome Powell, dampened hopes for a December rate cut, pointing to internal division and a lack of sufficient data to justify easing. Traders had earlier discounted the odds of a cut, weighing about 71% as of now, down from more than 85%.

Policy divergence widens

The contrasting central-bank signals drove the dollar higher vs the yen: USD/JPY rose to about ¥154.08, its highest since February. The BoJ kept its rate at roughly 0.5% and again saw only two board members dissenting in favour of a hike to 0.75%. That repeated split dampened hawkish expectations.

Wages, inflation and trade risks on radar

BoJ Governor Kazuo Ueda stressed that future rate moves depend on wage growth and inflation staying on track, making the next decision data-driven rather than prescheduled. He also highlighted lingering external risks, including trade policy and FX volatility.

Outlook: Yen remains vulnerable

With the BoJ staying cautious and the Fed signaling less urgency to cut, the yen may face more downside pressure. Investors will now watch upcoming wage data in Japan and U.S. employment/inflation figures closely — any surprise could trigger a renewed move in the FX space.

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