Insights 
VT 
Key Points:
- BOJ hikes policy rate to 0.75%, the highest in over 30 years
- Nikkei adds 276 pts, reversing two-day losses as chip stocks surge
- FOMC caution supports global risk appetite, while yen slips modestly
The Bank of Japan raised interest rates to 0.75% on Friday, marking a long-awaited exit from ultra-loose policy.
While the hike had been widely anticipated, traders welcomed the move as a sign of confidence in Japan’s economic recovery — especially with core inflation holding steady at 3.0% and exports outperforming forecasts.
Surprisingly, the yen weakened modestly after the decision, as markets focused on Governor Kazuo Ueda’s comments suggesting the terminal rate could range between 1.0% to 2.5%.
Traders are now reassessing whether the BOJ could deliver more than one hike in 2026.
Tech Stocks Power Nikkei Bounce
Chipmaker Advantest (+1.59%) and robotics giant Fanuc (+2.68%) led Friday’s gains, mirroring strength on the Nasdaq, which continues to benefit from AI tailwinds and cooling US inflation.
A surprise drop in US core CPI to 2.7% also lifted risk sentiment globally, though Fed officials have remained cautious on the pace of rate cuts.
Meanwhile, global tech optimism is spilling into Asia, with Taiwan and South Korea’s indices both rising over 1%, and Japan’s Topix index edging up 0.05%.
Technical Analysis
The Nikkei 225 is consolidating near 49,511, up 0.56% on the day, maintaining its overall bullish structure despite a slowdown in momentum since the November peak at 52,669.
The price action remains comfortably above the long-term support zone, and the 30-day moving average is still trending upward, suggesting that bulls retain structural control.
That said, the MACD shows signs of bearish divergence, with the histogram printing weaker bars and the MACD line drifting beneath the signal.
Price has been chopping sideways through most of December, and a clean breakout above 50,000 may be needed to resume the rally.
Conversely, a break below the 47,000–46,500 region could trigger broader correction risks into early 2026. For now, traders may wait for confirmation as the index tests key range boundaries.
Bottom Line
The BOJ’s rate hike, once feared as a market drag, is now being read as a sign of policy normalisation — not panic.
With chip stocks surging and the Nasdaq offering global tailwinds, the Nikkei remains well-positioned into year-end, especially if BOJ tightening proves gradual.
