The Bank of Japan (BOJ) raised its benchmark interest rate by 25 basis points to 1.25 percent in a 7-2 vote at the end of its two-day monetary policy meeting, resuming tightening after a three-month pause. The increase took the policy rate to its highest level since 1995.
The South Korean won showed little immediate reaction to the decision. The U.S. dollar rose to 1,386.1 won as of 1:40 p.m. after touching 1,379.02 won earlier in the session. KOSPI was 2.6 percent higher at 6,890.88.
Flattening deepened in the bond market as shorter-dated yields held firmer while longer maturities declined.
The two-year government bond yield stood at 3.997 percent and the three-year yield at 4.034 percent. The benchmark 10-year yield fell 5.4 basis points to 4.452 percent, while the 30-year yield declined 3.3 basis points to 4.574 percent.
The moves extended the flattening of South Korea's yield curve seen after the U.S. Federal Reserve raised its benchmark rate by 25 basis points earlier this week, as investors priced in tighter global monetary conditions while seeking longer-dated government bonds.
AJP TAKEAWAYS
- A 25-basis-point hike lifted the BOJ's benchmark rate to 1.25 percent, its highest level since April 1995.
- The 7-2 decision marked Japan's first rate increase since June, while markets shifted their attention to Ueda's guidance on the pace of further tightening.
- In Seoul, the dollar-won rate climbed to around 1,385 shortly after the decision, while Korean government bond yields had fallen broadly at the morning close.
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