The Bank of Japan raised its interest rate by 0.25%, bringing the policy rate to 0.5%.

To avoid confusion as was the case with the previous rate hike in July 2024, the rate hike had been factored in to a large extent through prior leaks and other media reports. As a result, a significant appreciation of the yen was avoided and the Nikkei hovered around 40,000 yen, so the rate hike was a success in the sense that it averted confusion.
However, the next rate hike could come as early as this summer, or even later in October if the election is taken into account, and in that case, the BOJ will have no immediate ammunition to unleash, so the yen may weaken.

Trump is expected to discuss oil price controls with OPEC at Davos, and he seems to be obsessed with the story of lower inflation from lower resource prices, saying that lower oil prices will lead to lower interest rates around the world. However, it remains to be seen whether this will go according to Trump’s idea.

After the BOJ meeting, the market sold off the dollar/yen, but it is now steady due to short covering. The market may be able to hold higher prices because of the rate hike, but short-term sources may be caught in short dollar-yen positions.