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China Fund News reporter Guo Wenjun

The Bank of Japan announced an interest rate hike, Japanese stocks rose sharply in late trading, the yen strengthened significantly, and Japanese government bonds fell across the board.

Bank of Japan announces rate hike

and reduce the scale of government bond purchases

According to Xinhua News Agency, the Bank of Japan held a monetary policy meeting on July 31.Decided to raise interest rates and reduce bond purchasesThis is the first rate hike since the Bank of Japan ended its negative interest rate policy in March this year.

The Bank of Japan announced on the same day that it would raise the policy interest rate from 0% to 0.1% to around 0.25%, and gradually reduce the amount of government bond purchases from the current approximately 6 trillion yen per month (1 US dollar is approximately 152.7 yen) to around 3 trillion yen per month from January to March 2026.

The Bank of Japan said in a statement that in terms of the sustainability and stability of achieving the 2% price increase target,“It is appropriate to adjust the degree of financial easing”If the economy and prices develop as expected,The central bank will "continue to raise policy interest rates and adjust the degree of financial easing"。

The market expects that after the rate hike, Japan's short-term interest rate will rise to around 0.3%, a high level since the international financial crisis in 2008. The rate hike will affect Japan's household deposits, housing loan rates and corporate borrowing rates.

In the July "Economic and Price Situation Outlook" report released on the same day, the Bank of Japan maintained its forecast that the core consumer price index (CPI) will maintain an annual growth rate of about 2% from now to 2026.

The Bank of Japan's recent operations are in line with market expectations. Greg Hirt, chief investment officer of Allianz Global Multi-Assets, commented before the Bank of Japan meeting on July 30-31 that given the relatively stable global and domestic growth prospects, the Bank of Japan is expected to take this opportunity to accelerate the normalization of monetary policy at the July meeting.

Greg Hirt believes that as the Bank of Japan continues to steadily move towards the path of monetary policy normalization, the next challenge is how to use policies to prove that the Japanese economy has normalized, facing inflation and wage pressures, while not prematurely slowing down economic growth through radical policy actions. The current economic data is mixed. On the one hand, economic growth is slowing down and private consumption is still weak. On the other hand, wage growth is accelerating and inflation expectations are rising.

Japanese stocks surge in late trading

On July 31, the Japanese stock market rose significantly, with a sharp rise in late trading. The Nikkei 225 index closed at 39,101.82 points, up 1.49%. The Topix index closed at 2,794.26 points, up 1.45%.

A total of 2,669 stocks rose on that day, accounting for 66.51%. S·SCIENCE, HYPER, and KIMOTO were the top gainers.

The yen has strengthened significantly

After the Bank of Japan announced a rate cut, the yen strengthened significantly. The USD/JPY exchange rate plunged in the short term. As of press time, the USD/JPY exchange rate barely held above 150, at 150.3195.

Japanese government bonds fell across the board

After the news was announced, Japanese bonds were sold off in the market, and yields of bonds of all maturities rose sharply across the board.

According to Xinhua Finance, after the announcement of the interest rate hike, Japanese bond prices fell across the board, with the 10-year Japanese bond yield rising by more than 7 basis points to 1.076%. As of press time, the 2-year Japanese bond yield rose by 8 basis points to 0.455%, the 3-year Japanese bond yield rose by 7.9 basis points to 0.506%, the 5-year Japanese bond yield rose by 8.1 basis points to 0.669%, and the 10-year Japanese bond yield rose by 5.7 basis points to 1.058%.

The Federal Open Market Committee (FOMC) will hold a meeting on July 31, Eastern Time. According to FED Watch, which predicts the direction of monetary policy based on the price trend of U.S. interest rate futures, the probability of a rate cut at the July FOMC meeting is 4%.

Editor: Joey

Review: Xu Wen

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