Asian shares gain, yen eases after BOJ raises rates

Markets had wagered on only one more hike next year to 1.0%, even though BOJ Governor Kazuo Ueda has suggested a neutral range for rates would extend from 1.0% to as high as 2.5%

Asian share markets held gains on Friday while the yen eased after the Bank of Japan raised interest rates to a three-decade high and left the door wide open to further tightening.

The decision to lift rates to 0.75% had been widely anticipated and the knee-jerk reaction was to sell the yen on the fact, while awaiting a more detailed outlook from BOJ Governor Kazuo Ueda’s media conference later in the session.

Markets had wagered on only one more hike next year to 1.0%, even though Ueda has suggested a neutral range for rates would extend from 1.0% to as high as 2.5%.

Investors will thus be cautious in case he offers any hint that rates could be hiked more than once in 2026.

Given that real interest rates remain strongly negative despite today’s hike, the BOJ signalled that further tightening was likely, Abhijit Surya, a senior APAC economist at Capital Economics, said.

Our own view is that the incoming data are more likely than not to surprise to the upside, he added, and saw rates reaching 1.75% by 2027.

Data on Friday showed Japan’s core CPI rose at an annual pace of 3.0% in November, unchanged from the previous month.

Yields on Japan’s 10-year bonds held at 1.975%, just below an 18-year high.

Nikkei was up 1.3%, having tracked an overnight rally on U.S. stock market. South Korea gained 0.8% and tech-heavy Taiwan 1.3% encouraged by stellar results from chipmaker Micron Technology.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.7%, while Chinese blue chips rose 0.6%.