BOJ Hikes to 31-Year High, Yen Weakens as USD/JPY Tops 157
As of 2026-09-18 17:00 SGT
Key points
- The Bank of Japan raised its policy rate by 25bp to 1.25%, a 31-year high, but the vote split 7-2. Governor Ueda said the "phase of policy has changed" and did not rule out consecutive hikes or a larger step size.
- The two dissents were read as diluting the hawkish signal, and the yen weakened instead of strengthening. USD/JPY climbed from Thursday's low near 155.86 toward a session high close to 157.91 before settling around 157.80 heading into the European open. MUFG Bank raised its ordinary deposit rate to 0.5%, a 34-year high.
- The Nikkei 225 closed up 882 points (+1.38%) at 65,019, a third straight advance, while Taiwan's TAIEX jumped 1.93% to 47,180.75 on TSMC-led buying and heavy net inflows from institutional investors.
- The Fed delivered its first rate hike in three years on Wednesday (25bp), with the dot plot signaling one more possible move this year. The initial shock — gold plunging, the dollar spiking, the Dow diving — gave way to a broad "post-Fed bounce" through Thursday and into Friday. The 10-year Treasury yield eased to 4.947% (-5.9bp).
- Tension flared in the Strait of Hormuz after reports of an attack on a tanker, even as WTI extended a third day of declines on hopes Saudi Arabia can restore pipeline capacity; gold and silver moved the other way, both firmer.
Market snapshot
| Instrument | Level | Change |
|---|---|---|
| USD/JPY | 157.80 | +1.19% |
| EUR/USD | 1.1486 | +0.05% |
| Nikkei 225 (close) | 65,019 | +1.38% |
| Hang Seng (close) | 24,751 | +0.15% |
| Dow futures | 52,303 | +0.16% |
| S&P 500 futures | 7,729.25 | +0.29% |
| Nasdaq 100 futures | 29,912 | +0.57% |
| Gold futures | 4,428.60 | +0.66% |
| WTI crude | 95.56 | -1.72% |
| Bitcoin | 78,178 | +2.39% |
| US 10-yr yield | 4.947% | -5.9bp |
Foreign exchange — Yen softer despite the hike
The BOJ lifted its policy rate to 1.25%, but the 7-2 vote left two dissents on record, and that was enough for the market to conclude that consecutive tightening is no sure thing. USD/JPY rose rather than fell on the decision, pushing toward Thursday's high near 157.91 before easing back to trade around 157.80 into the European open, roughly two yen above Thursday's low of 155.86. EUR/USD was little changed near 1.1486. Into the NY open, the policy-divergence trade should keep USD/JPY anchored in the high-157s.
Equities — Japan and Taiwan lead, Hong Kong holds firm
The Nikkei 225 closed a third straight session higher, up 882 points (+1.38%) at 65,019, with chip-linked names among the leaders as investors treated the split BOJ vote as a dovish tilt. Taiwan's TAIEX surged 1.93% to 47,180.75 on TSMC-led buying, with institutional investors recorded as large net buyers ahead of TSMC's OIP ecosystem forum in Silicon Valley next week; UMC's ADR jumped more than 8%. The Hang Seng closed up 0.15%, with its tech sub-gauge outperforming, up more than 2% on the back of Thursday's Wall Street tech rally. Tokyo tomorrow will hinge on whether the chip-led bid has more room to run.
Macro — Fed hike digested, US data send mixed signals
The Fed's first hike in three years on Wednesday came with a dot plot flagging one more possible move in 2026, and officials' subsequent remarks briefly whipsawed markets — gold, the dollar and the Dow all swung sharply — before a broad-based bounce took hold through Thursday and into Friday's session. US data released Thursday were mixed: weekly jobless claims came in below expectations, while August housing starts fell well short of forecasts. The 10-year Treasury yield has eased to 4.947% (-5.9bp), pulling back from mid-week's spike. Tonight's address from ECB President Lagarde, into the NY open, should help set the tone for the dollar index and long-end yields heading into the weekend.
Commodities — Gold and silver diverge higher, oil extends its slide
Gold futures are up 0.66% at $4,428.60, recovering back above $4,400 after the post-Fed plunge earlier in the week. Spot silver outpaced gold, at one point up roughly 3% on the day. WTI crude fell 1.72% to $95.56, a third straight decline, weighed by reports that Saudi Arabia is moving to restore pipeline capacity; that level is well off Thursday's high of $102.47. Into the NY open, Saudi supply-recovery hopes and Middle East risk should keep oil rangebound.
Geopolitics — Strait of Hormuz flares, Xi-Trump summit still undated
Tension in the Strait of Hormuz resurfaced after reports of an attack on a tanker, keeping a geopolitical risk premium in play for oil. A UN mission concluded there are reasonable grounds to believe US strikes in Iran may have violated the laws of war; Washington rejected the finding. On US-China relations, reports have floated a possible Xi-Trump summit later this month, but China's foreign ministry has said only that the two sides are "maintaining communication" on leader-level engagement, stopping short of confirming a date. Into the NY open, Middle East headlines remain the key swing factor for oil and safe-haven demand.
Upcoming events
| Time (SGT) | Region | Event | Focus |
|---|---|---|---|
| 09/18 18:30 | EU | ECB President Lagarde Speaks | Watch for signals on the policy path and inflation outlook late in the hiking cycle |