The Bank of Japan left rates unchanged and lifted its inflation outlook, but the yen still rose on softer US yields.
MoneyTurkey Bonds Desk | 2 November 2026
Key points
- The yen rose 0.11% to 157.51 per dollar after the BOJ held its main rate at 1.25%.
- US Treasury yields fell and the dollar index stayed flat at 101.88, capping the yen’s advance.
The Bank of Japan kept its policy rate at 1.25% on Friday and raised its inflation forecast, yet the yen still posted a third straight daily gain. The move was widely expected, but the bank’s language signalled a more hawkish stance that could allow rate increases every few months. At the same time, a drop in US Treasury yields weighed on the dollar, giving the yen extra support. Traders said the yen’s advance was modest compared with earlier moves because the Federal Reserve’s steady bias offset the BOJ’s shift.
What happened
The BOJ concluded its two-day meeting by leaving the main policy rate unchanged at 1.25%. It also upgraded its inflation outlook, noting that price pressures remain above its 2% target. The decision followed a week of central-bank meetings in which the ECB, the Fed and the Reserve Bank of New Zealand also held rates steady.
The yen traded up 0.11% to 157.51 per dollar in late New York trading. It was on course for a third consecutive daily gain but still headed for a monthly loss in October. Analysts at TS Lombard said the bank could raise rates in December, March and July, lifting the policy rate to 2% before pausing.
The dollar index, which measures the greenback against six major currencies, was flat at 101.88. It remained on track for a second straight monthly gain.
What is moving yields
Declining US Treasury yields reduced the dollar’s appeal and supported the yen. The sell-off in US yields followed weaker-than-expected results from Alphabet, Amazon and Intel, which raised concerns about artificial-intelligence spending and triggered a drop in technology stocks.
The euro fell 0.12% to $1.1168 and was set for a second consecutive monthly loss. Sterling rose 0.2% to $1.3396, while the Australian dollar gained 0.1% to $0.70345. Both currencies were on track for monthly gains.
Bitcoin fell 2.6% to $76,780.93 after hackers stole $6.3 billion from Binance, the largest crypto theft on record. The move added to risk-off sentiment but had limited direct impact on government-bond markets.
Why it matters
The BOJ’s decision keeps the policy gap with the Fed wide, but the bank’s updated language opens the door to faster tightening. Markets now price three more 25-basis-point hikes by mid-2026, which could lift the policy rate to 2%.
For bond desks, the yen’s strength matters because it can influence cross-market flows. A stronger yen tends to reduce the appeal of US Treasuries for Japanese investors, adding to downward pressure on yields when US data are soft.
The euro’s weakness and the dollar index’s resilience show that currency moves remain driven by relative growth and rate differentials rather than outright risk aversion. Traders will watch the Bank of England and Reserve Bank of Australia meetings this week for further clues on global rate paths.
What to watch
- BOJ December meeting and updated dot plot
- US non-farm payrolls and core PCE for yield direction
- ECB December policy statement on rate path
- Japanese pension and insurer FX-hedged Treasury flows
For information only. Not investment advice.
Sources
- Reuters: https://www.reuters.com/world/asia-pacific/yen-steady-before-boj-ai-jitters-drive-treasury-rally-weigh-dollar-2026-10-30/
- Japan Times: https://www.japantimes.co.jp/business/2026/10/30/economy/tokyo-cpi-october/
- The Business Times: https://www.businesstimes.com.sg/companies-markets/capital-markets-currencies/yen-gains-against-us-dollar-after-bank-japan-holds-rates
- Business Recorder: https://www.brecorder.com/news/40446730
