The yen strengthened more than 1.5% against the dollar and equities advanced after the decision, led by a surge of almost 5% in a gauge of bank stocks. The yield on 10-year government bonds rose 6 basis points to 1.055% and yields on two-year notes hit a 15-year high.
The Bank of Japan raised its benchmark interest rate and unveiled plans to halve bond purchases, underscoring its determination to normalise monetary policy.
The BOJ hiked its policy rate to around 0.25% from a range of 0% to 0.1%, according to a statement on Wednesday. It also said it would reduce its monthly pace of bond buying to around 3 trillion yen ($26.6 billion) by the first quarter of 2026. The recent pace of purchases has been about double that amount.
