BOJ Hikes to 1.25%, Yen Slips to 157 as Nikkei Tops 65,000
As of 2026-09-18 12:00 SGT
Key points
- The Bank of Japan raised its policy rate by 25bp to 1.25% in a 7-2 vote, its first hike since June and a 31-year high.
- Two dissents tempered the hawkish read, and USD/JPY rose to the 157 handle (157.01, +0.68% on the day) even as the hike itself met expectations.
- The Nikkei 225 extended gains sharply, reclaiming the 65,000 level for the first time in eight sessions on chip-sector buying (65,347, +1.89%).
- Japan's August core CPI rose 1.7% y/y, below forecast and the eighth straight month under the BOJ's 2% target.
- Markets are digesting Wednesday's Fed rate hike, the first in three years; US equity futures are little changed while oil extends its slide as Middle East supply fears ease.
Market snapshot
| Instrument | Level | Change |
|---|---|---|
| USD/JPY | 157.01 | +0.68% |
| EUR/USD | 1.1492 | +0.10% |
| Nikkei 225 (intraday) | 65,347 | +1.89% |
| Hang Seng (intraday) | 24,758 | +0.18% |
| Dow futures | 52,258 | +0.07% |
| S&P 500 futures | 7,713.50 | +0.08% |
| Nasdaq 100 futures | 29,762 | +0.06% |
| Gold futures | 4,395.70 | -0.09% |
| WTI crude | 101.02 | -0.87% |
| Bitcoin | 77,310 | +1.26% |
| US 10-yr yield | 4.947% | -5.9bp |
Foreign exchange — Yen sags despite the hike
The BOJ's 25bp hike to 1.25% matched expectations, but a wider-than-expected 7-2 split fed a "less hawkish than it looks" read, and USD/JPY firmed to 157.01 (+0.68%), inside Thursday's 155.86-157.15 range. The yuan held its own bid, with both onshore and offshore rates briefly reclaiming the 6.70-per-dollar handle against a broadly softer post-Fed-hike dollar. EUR/USD was little changed at 1.1492 (+0.10%). Into the rest of the European session, USD/JPY's ability to hold above 157 will hinge on how Governor Ueda frames the pace of further tightening at his afternoon press conference.
Equities — Chip-led rally lifts Nikkei back above 65,000
The Nikkei extended its advance to reclaim 65,000 for the first time in eight sessions, last at 65,347 (+1.89%), as investors read the split BOJ vote as a signal that policy normalization won't be rushed and kept buying semiconductor names. The Hang Seng added a more modest 0.18% to 24,758. Mainland Chinese shares were firmer into the midday break, with the Shanghai Composite up 1.04% at 3,916.07 and the ChiNext up 2.11%, led by chip and AI-hardware names. For the remainder of the Asian session, the chip-led bid looks set to continue unless the yen's reaction to Governor Ueda's press conference forces a rethink.
Macro — A week of central-bank action confirms the normalization path
Japan's August core CPI came in at 1.7% y/y, short of forecasts, but the BOJ maintained its view that prices will move closer to 2% in the second half of the fiscal year and pressed ahead with the hike regardless. The Fed delivered its first rate hike in three years on Wednesday, and the Bank of England held its rate at 3.75%. Tonight's UK retail sales print and an ECB address from President Lagarde cap a week thick with central-bank signals that should keep shaping USD/JPY and cross-yen positioning into next week.
Commodities — Oil extends its slide, gold little changed
WTI crude eased further to $101.02 (-0.87%) as reports that Saudi Arabia could restore its damaged pipeline's capacity within days took some edge off Strait of Hormuz supply fears. Gold futures were essentially flat at $4,395.70 (-0.09%), showing little directional conviction. Through the rest of the Asian session, oil looks likely to stay headline-sensitive to any further twist in the Middle East standoff.
Geopolitics — Iran tensions still simmering
Tensions between the US and Iran remain elevated: a UN mission said it found evidence pointing to possible US war crimes in strikes inside Iran, a finding Washington has rejected, while attacks on shipping in the Strait of Hormuz continue to complicate Saudi oil-export logistics. A prolonged standoff in the Middle East keeps oil and broader risk sentiment exposed to headline risk.
Upcoming events
| Time (SGT) | Region | Event | Impact |
|---|---|---|---|
| 09/18 13:30 | JP | BOJ Press Conference | Governor Ueda's guidance on the pace of further hikes |
| 09/18 14:00 | UK | Retail Sales m/m (forecast -0.2%) | Read on consumer resilience against a 3.1% inflation backdrop |
| 09/18 18:30 | EU | ECB President Lagarde Speaks | Caps a week dense with central-bank signaling |