Bank of Japan Holds Rates Steady as Tokyo Intervenes to Support Weak Yen

The Bank of Japan kept its benchmark interest rate unchanged at 1% on Friday but signaled it remains ready to raise borrowing costs further, a day after Tokyo stepped into currency markets to prop up a sliding yen.

Rate Decision and Dissent

The central bank’s board voted 8-1 to hold rates steady, with board member Hajime Takata dissenting in favor of a 1.25% hike. The BOJ said it would keep raising rates in line with economic activity, prices, and financial conditions. Its inflation outlook showed price risks skewed to the upside, with core CPI forecasts for fiscal 2026 trimmed slightly to 2.5%.

Yen Intervention Ahead of Decision

Japan reportedly conducted yen buying, dollar-selling intervention in New York markets on Thursday, its first such move in three months, after the yen fell to four-decade lows. Currency diplomat Atsushi Mimura declined to confirm the action directly but hinted at coordination with the United States, including rate checks by the Federal Reserve.

US Treasury Weighs In

US Treasury Secretary Scott Bessent said the yen looked “very undervalued,” a comment some read as tacit approval of Tokyo’s intervention. The Treasury had earlier urged Japan to raise rates further, citing strained household purchasing power despite rising nominal wages. Japanese government bond yields rose ahead of the announcement, while the Nikkei jumped over 4%.