Japan just made a historic move, and the market reaction says a lot about how traders are reading it. The Bank of Japan raising rates to 0.75% — the highest level in 30 years — marks a clear shift away from its ultra-loose era. On paper, this is a big step toward normalization. In practice, markets are still questioning how far and how fast the BoJ can really go.
Inflation tells the story. Tokyo’s core inflation cooling to 2.3% suggests some easing, yet nationwide core inflation remains around 3.0%, still above the BoJ’s target. That keeps pressure on policymakers, especially with the upcoming Shunto wage negotiations, which will decide whether inflation is truly sustainable or just temporary. Without strong wage growth, aggressive tightening remains unlikely.
The reaction was telling: Nikkei 225 jumped over 1%, while the yen weakened against the dollar. This might look counterintuitive, but it makes sense. Even after the hike, Japan’s rates are still far below U.S. levels, and that interest rate gap continues to dominate currency flows. As long as that gap remains wide, USD/JPY stays structurally supported, keeping the yen technically bearish despite headline policy shifts.
From a technical view, the yen remains under pressure, trading within a broad 140–160 range, while the Nikkei holds a long-term bullish structure, even as it consolidates short term. A stronger yen could become a headwind for exporters, but for now, equity markets seem comfortable betting that monetary tightening will remain gradual.
This is a reminder that policy shifts don’t move markets alone — expectations do. Until Japan closes the rate gap meaningfully or wage growth accelerates, the yen may stay weak, and equities may continue to benefit. Patience, not prediction, is the real edge here.$CC $BEAT
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