The policy rate was raised to 0.25% at the Bank of Japan’s policy meeting.

At the same time, a decision was made to reduce the pace of JGB purchases by JPY 400 billion per quarter. The reduction in JGB purchases had already been decided at the previous meeting, so there was no particular impact, but the simultaneous increase in interest rates was a surprise. The market started with the late night NHK report and the Nikkei flash report, falling by JPY 9. Governor Ueda stated that the Bank would continue to raise policy rates if the economic and price outlook is realised, and the market was unable to keep up with the unexpectedly hawkish stance.

The US FOMC statement on the same day was slightly more hawkish, but did not exceed market expectations for a confirmation of a September rate cut. Nevertheless, with the BOJ being hawkish and the FOMC dove, the USD/JPY dropped below 150 yen in Tokyo.

The Bank of England moved to raise interest rates for the first time in four years and five months. The decision was a close 5:4, which should have been expected well in advance given the 80-point fall from around 15:00. After the announcement, there was rather a noticeable buying back.

The US manufacturing index released on Thursday was very poor: 46.8 (forecast 48.8). The figures were bad, but the worst was the employment index at 43.4, a significant deterioration from the previous reading of 49.3. New Unemployment Insurance Claims were also bad at 249,000, so it was already assumed that the employment figures would be bad and there was a strong sell-off in USD/JPY before the figures were released. It is likely that the US economy will be in recession in the coming days and the dollar will be sold where it has rebounded. Further falls are likely depending on volatility.