The Bank of Japan raises interest rates on schedule to a 30-year high, but the yen unexpectedly plunges to the 157 level.

The Bank of Japan (BoJ) today as scheduled raised its policy interest rate by 25 basis points (bps) to 0.75%, reaching the highest level in thirty years. However, market reactions were unexpected — the yen not only failed to appreciate on the positive news but also weakened during European trading hours, with USD/JPY surging by 0.85%, touching around 156.90 and approaching the 157.00 level.

Hawkish signals from the central bank fall short of market expectations

BOJ Governor Kazuo Ueda reiterated at the press conference that if economic data and inflation trends meet expectations and the improvement continues, the central bank will continue its rate hike process. This statement should have supported the yen, but doubts remain about its actual implementation.

The key issue is — when and by how much will the central bank continue to raise rates in 2026? No clear guidance has been provided. This policy uncertainty has instead reinforced investors’ cautious stance, putting heavy pressure on the yen. In contrast, although the Fed’s dovish expectations for the January meeting have cooled somewhat, the dollar continues its strong rally.

Multi-currency comparison: Yen under broad pressure

The table below provides a real-time snapshot of the relative performance of major currencies:

The yen is the worst performer among major currencies, showing a one-way depreciation against the USD, EUR, and CAD. From the perspective of CAD trading signals, the Canadian dollar remains relatively stable against the dollar, indicating stronger stability in the North American market, contrasting sharply with the significant volatility of the yen.

US dollar index hits weekly high, yen bearish sentiment intensifies

According to the latest quotes, the US dollar index (DXY), which tracks the value of the dollar against six major currencies, approached 98.65, hitting a new weekly high. Despite a slowdown in US November inflation data, market expectations of a policy shift by the Fed remain cautious, further supporting the dollar’s strength.

In contrast, the yen faces selling pressure from multiple dimensions: insufficient guidance on rate hikes from the central bank, the entrenched long-term low-interest rate arbitrage logic, and the yen’s repurchase pressure driven by a rebound in global risk assets. Under this environment, breaking the 157 level in USD/JPY is almost a consensus among market participants.

Most market participants believe that the BOJ needs to provide more specific rate hike pathways to truly change the yen’s depreciation trend. Otherwise, under the dual influence of a strong dollar and ample global liquidity, the yen will continue to face long-term depreciation.