Year: 2025

  • More detail on Bank of Japan decision to raise rates by 25bp to the highest in 30 years

    Summary

    • BoJ raised policy rate to 0.75% as expected
    • Decision was unanimous, but wording saw dissent
    • Real rates remain significantly negative

    The Bank of Japan raised its short-term policy rate by 25 basis points to 0.75%, delivering a widely anticipated move that takes borrowing costs to their highest level in around three decades. The decision was approved by a unanimous vote, underscoring broad agreement among policymakers that conditions now justified a further step toward normalisation.

    Despite the hike, the BoJ was careful to emphasise that monetary conditions remain accommodative, repeatedly highlighting that real interest rates are expected to stay significantly negative even after the policy adjustment. Officials said the move should be seen as part of a gradual and cautious process rather than a shift toward restrictive policy.

    In its statement, the central bank said it would continue to raise the policy rate if the economy and prices move in line with its forecasts, signalling conditional openness to further tightening. Policymakers added that the likelihood of achieving the baseline scenario has been rising, reflecting growing confidence that inflation dynamics are becoming more durable.

    The BoJ reiterated that it will conduct policy from the perspective of sustainably and stably achieving its 2% inflation target, while avoiding excessive tightening that could destabilise financial conditions. Officials said wages and inflation are likely to continue rising moderately in tandem, reinforcing the narrative that price pressures are increasingly supported by domestic demand rather than temporary cost factors.

    However, the meeting also revealed nuances within the Policy Board. Board member Takata opposed the description of the inflation outlook, arguing that the rate of increase in CPI, including underlying measures, had already generally reached the price stability target. Separately, board member Tamura opposed the wording on underlying CPI inflation and said it was likely to be broadly consistent with the target from the middle of the projection period.

    These objections did not extend to the rate decision itself but highlight an emerging debate over how close Japan is to achieving price stability on a sustained basis, a discussion that could shape the pace of future tightening.

    From a market perspective, the decision was said to be fully priced, limiting immediate volatility in the yen and JGBs. Despite this the yen fas dipped, with USD/JPY popping above 158.00. Focus is expected to remain on guidance, wage trends and how confidently the BoJ views inflation sustainability heading into 2026.

    Overall, the message was clear: normalisation is progressing, but the Bank remains committed to moving slowly, carefully and data-dependently, with no preset path for further rate increases.

    —

    Due at 0630 GMT is Bank of Japan Governor Ueda’s news conference

    This article was written by Eamonn Sheridan at investinglive.com.

  • Bank of Japan hikes its short term rate by 25bp to 0.75%, as expected

    The Bank of Japan raised its short-term policy rate by 25 basis points, lifting it to 0.75%, in a widely anticipated move that marks the highest level in roughly three decades and underscores the central bank’s gradual shift away from ultra-loose policy.

    I’ll have more specific detail on the statement and associated BoJ releases soon, but for now I want to note the following.

    The decision had been fully priced by markets following a steady drumbeat of firm inflation data and increasingly confident signals from policymakers. As a result, the immediate market reaction was muted, with attention quickly turning from the rate hike itself to the Bank’s forward guidance and Governor Kazuo Ueda’s assessment of the path ahead.

    In its statement, the BoJ acknowledged that inflation has remained above its 2% target for an extended period, supported not only by imported cost pressures but also by firmer domestic price dynamics. At the same time, policymakers emphasised that real interest rates remain clearly negative, reinforcing the view that monetary conditions are still accommodative even after the hike.

    Governor Ueda will likely strike struck a cautious tone in his press conference, stressing that future adjustments will depend on whether inflation proves sustainable and demand-driven. He’ll highlight the importance of wage developments, household consumption and corporate investment, while also noting the recent rise in Japanese government bond yields and the need to avoid destabilising financial conditions.

    Markets continue to debate the timing of the next move. While some pricing points to another hike as early as mid-2026, others argue the bar for further tightening has risen, particularly given lingering uncertainty around global growth and the transmission of higher rates through Japan’s highly leveraged public sector.

    From a market perspective, the lack of surprise reduced the risk of volatility seen during earlier policy shifts. Unlike past episodes that triggered sharp yen-funded carry unwinds, the currency’s reaction this time is likely to be driven more by guidance than by the rate increase itself.

    Overall, the decision reinforces the BoJ’s message: policy normalisation is under way, but it will proceed slowly, cautiously and data-dependently, with no preset course for further tightening.

    Bank of Japan Governor Ueda’s press conference begins at 0630 GMT / 0130 US Eastern time.

    This article was written by Eamonn Sheridan at investinglive.com.

  • Toyota to sell U.S.-made vehicles in Japan to ease trade tensions

    Summary

    • Toyota to export U.S.-made vehicles to Japan
    • Move aimed at easing U.S.–Japan trade tensions
    • Tariff relief a key motivation

    Toyota Motor Corp plans to begin selling U.S.-manufactured vehicles in Japan from 2026, a move aimed at easing trade tensions with Washington and strengthening ties with President Donald Trump’s administration as tariff negotiations remain in focus.

    The Japanese automaker said it will export three U.S.-built models, the Camry, Highlander and Tundra, to the Japanese market, with production sourced from plants in Kentucky, Indiana and Texas. Toyota said the vehicles are intended to meet a range of customer needs in Japan while also demonstrating the company’s commitment to balanced Japan–U.S. trade relations.

    The decision comes as Toyota and other Japanese automakers seek to encourage the Trump administration to ease or remove tariffs on Japanese car and auto-parts exports to the United States. Trump has repeatedly criticised trade imbalances in the auto sector and has pushed foreign manufacturers to expand U.S. production and exports as part of his broader trade agenda.

    Toyota already operates extensive manufacturing operations in the United States and has long argued that it is a major contributor to U.S. employment and investment. Exporting U.S.-made vehicles back to Japan represents a symbolic reversal of traditional trade flows and underscores Toyota’s willingness to align with Washington’s policy priorities.

    While Japan’s domestic auto market has historically favoured smaller vehicles, Toyota said the selected models reflect growing diversity in consumer preferences and will complement its existing lineup. The company did not disclose expected sales volumes, but analysts view the move primarily as a strategic trade and political gesture rather than a volume-driven initiative.

    From a broader perspective, the plan highlights how global automakers are increasingly adapting supply chains and sales strategies in response to geopolitical pressures rather than pure market demand. For Toyota, the move reinforces its position as a bridge between the world’s two largest auto markets at a time when trade policy uncertainty remains elevated.

    This article was written by Eamonn Sheridan at investinglive.com.

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