USD/JPY: Yen Sinks Over 1% to Dollar as Bank of Japan Keeps Interest Rates Flat

No surprises — Japan’s central bank met expectations of a rate hold and cited increased uncertainty over Trump’s dangerous tariff games.

🤝 Interest Rates Flat, Trump’s Tariffs Are a Threat

• The Japanese yen took a beating on Thursday after the Bank of Japan did exactly what markets expected — kept rates steady — but added a heavy dose of caution about the global outlook.
• The USDJPY pair jumped over 1% to trade near ¥144.50, as traders ditched the yen following the central bank’s decision to keep its benchmark interest rate at 0.5% for the second straight meeting.
• The move was widely anticipated, but the tone of the BoJ’s statement jolted the yen. Officials noted that while inflation has stayed above their 2% target for three years running, the current climate — dominated by President Trump’s tariff threats and global trade tension — isn’t ideal for rate hikes just yet.

🤨 Tariffs Cast a Long Shadow Over Rate Hike Plans

• The BOJ said it would continue to raise rates only if its economic and price forecasts hold up. But in the same breath, it flagged that Japan’s growth is likely to moderate, pointing to a slowdown in external economies and declining corporate profits at home.
• In other words, there’s room to hike, but Trump’s tariff chessboard is keeping policymakers sidelined for now. With Washington pushing for aggressive trade deals and dangling retaliatory tariffs, Japan finds itself in a tight spot — especially with export-heavy sectors showing signs of strain.

💪 Markets Say: Risk On, Yen Off

• The yen, already under pressure from a strengthening US dollar and risk-on sentiment globally, tumbled for the third day in a row. Traders interpreted the BoJ’s message as dovish, especially compared to a US Federal Reserve that — at least for now — isn’t under the same external political stress.
• For currency markets, it’s a green light to rotate into higher-yielding assets. And with US yields holding firm and Japanese policy looking stuck for now, the dollar-yen could test higher levels unless Japan’s inflation picture or external dynamics shift decisively.