USD/JPY: Dollar Tops ¥150.50 After Bank of Japan Raises Rates for First Time Since 2007

Japan’s central bank is the world’s last to unwind easy-money policy. Its consumer-friendly outlook didn’t help the yen shine.

Key Points:

• Bank of Japan raises rates to 0-0.1%.
• Yen plummets on dovish BoJ outlook.
• Easy-money policies to stay in place.
• The USDJPY pair jumped above ¥150.00 after the Bank of Japan moved out of its seven-year long negative interest rate regime. Even more, the central bank hiked rates for the first time since 2007, shifting borrowing costs from a negative 0.1% to between 0% and 0.1%. Normally, this decision alone would send the local currency flying. What happened?
• The Bank of Japan issued a dovish outlook, vowing to maintain financial conditions easy for the foreseeable future in a bid to support consumers and businesses navigate through this historic event. Policymakers said they’re scrapping the yield curve control which was introduced in 2016 as a way to bolster easy-money policies. The central bank will continue buying ¥6 trillion ($40 billion) a month in Japanese government bonds.
• The nuanced move by Japan’s central bankers didn’t inspire confidence in the yen. Traders rushed to dump their yen holdings, sending the USDJPY higher by roughly 1% to ¥150.50. A battered yen is generally a headache for Japan’s government, which has previously said it might intervene anywhere above the 150.00 threshold to the dollar. The ‘widow maker’ trade played out once again.