The yen rallied during New York trading as USD/JPY slid from 163.00 to 158.00 before rebounding, a move framed as likely Ministry of Finance intervention against a backdrop of broader US dollar weakness. The Bank of Japan then kept its key policy rate unchanged at 1.00%, with the decision passed by an 8-1 vote in a meeting that also delivered an updated Outlook for Economic Activity and Prices.
In the outlook, the BoJ again pointed to upside inflation risks, while the wording placed greater weight on foreign exchange developments as a source of upward pressure; it also cited AI demand as an area requiring attention. The forecast for core nationwide CPI in FY2026 was revised down to 2.5% from 2.8%, while the FY2027 projection was raised to 2.4% from 2.3%, suggesting inflation pressures remain in view. Communication signalled further tightening but did not indicate a faster pace than the current six-month rhythm, leaving the policy backdrop unchanged even as the MoF’s propensity to intervene more than once remains a live market consideration.
