Yen Watch: BoJ Hike, Markets Stay Calm 💴

The Bank of Japan’s expected rate hike marks another step away from ultra-loose policy, but the yen’s reaction has been muted so far. Despite higher rates, USD/JPY remains elevated, reflecting the still-wide interest rate gap with the US. Markets had largely priced in the move, shifting focus from the hike itself to how far the BoJ eventually takes rates over the next few years. For global markets, this keeps risk sentiment broadly steady rather than decisively risk-off. A sharp yen strengthening, which could trigger aggressive carry trade unwinds and this hasn’t materialised yet. Until that happens, US equities remain driven by Fed expectations and earnings, while Indian markets stay relatively cushioned by strong domestic liquidity, though intermittent FII volatility cannot be ruled out.