The Japanese yen briefly strengthened to around 159 per dollar on Tuesday before paring gains, after the Bank of Japan left its policy rate unchanged at 0.75% for a fourth consecutive meeting, as widely expected. The central bank raised its inflation forecast while cutting its FY2026 growth outlook to account for the economic impact of the conflict in the Middle East.
In a notable development, three of the nine policy board members voted in favor of a rate hike, underscoring growing concern about inflationary pressures associated with the war involving Iran. BOJ Governor Kazuo Ueda reaffirmed the bank’s commitment to a gradual tightening trajectory, indicating that interest rates could continue to increase as economic, price, and financial conditions evolve.
Separately, Finance Minister Satsuki Katayama reiterated that authorities stand ready to intervene in the foreign exchange market at any time to support the yen.
