The BoJ raised its key interest rate, but the JPY seems to have taken little notice. At the time of writing, USD/JPY is little changed, which is not what you would expect in response to a rate hike, especially one that was larger than expected. But let's take things one step at a time, Commerzbank’s FX analyst Volkmar Baur notes

BoJ raises its key interest rate to 0.25%

“The BoJ raised its key interest rate to 0.25% from 0-0.1%. In addition, it was announced that the volume of bond purchases, which was recently JPY 5.7 trillion per month, will be reduced by JPY 0.4 trillion per quarter until it reaches JPY 3 trillion per month at the beginning of 2026. As a reminder, these are gross purchases.”

“Since a larger volume of bonds is currently maturing each month, this reduces the amount on the BoJ's books. This brings us back to the assessment of a reactive central bank.”