The Bank of Japan held its policy rate steady at 1.25%, a decision that was widely anticipated and therefore unlikely to shift market pricing by itself. The main transmission channel runs through the rate differential between Japan and other major economies: with Japanese short rates still well below those of the United States and Europe, the yen remains vulnerable to carry-trade flows and to any signal that tightening will be delayed further. Yen-denominated assets and currency pairs such as USD/JPY are the most directly exposed, while Japanese equities and longer-dated JGBs are sensitive to shifts in expectations about the pace of future hikes. The next key catalyst for traders is the Bank's updated outlook and the press conference commentary on wage growth and underlying inflation, alongside the upcoming national CPI release, which will shape whether markets price a nearer-term move.
BoJ keeps policy rate unchanged at 1.25%, as expected
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