Bank of Japan Raises Rates, Making U.S. Less Alluring for Tokyo Investors

The Bank of Japan hiked its policy rate to 1.25%, the highest since 1995, tightening monetary policy further as it normalizes from decades of ultra-loose conditions. This narrows the interest-rate differential between Japan and the U.S., which had been a key driver of yen weakness and carry-trade positioning. The move signals BOJ resolve on inflation control and may pressure USD/JPY lower, while reducing the incentive for Japanese investors to rotate capital into higher-yielding U.S. equities and bonds.

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