Yen sinks after Bank of Japan raises rates to highest since 1995 - Financial Times

The Bank of Japan has raised its policy rate to its highest level since 1995, according to the Financial Times, yet the yen weakened after the decision. That apparent contradiction is the key point for observers: currency moves often reflect expectations already priced in, rather than the headline itself.

When a central bank hikes but the currency falls, it usually signals that markets anticipated the move — or expected more aggressive tightening than was delivered. Rate differentials with other major economies also matter. If Japan's rates remain low relative to peers, the yen can stay under pressure even as domestic borrowing costs rise.

For global markets, a weaker yen affects several channels. It can support Japanese exporters' overseas earnings when translated back into yen, while raising import costs at home. It also matters for carry trades, where investors borrow in low-yielding currencies to fund higher-yielding assets.

What to watch: the pace of future BOJ tightening, guidance on the rate path, and whether yen weakness prompts official commentary or intervention.