Market Highlight 22.12.2025

The Bank of Japan (BOJ) has raised its policy interest rate to the highest level in 30 years and signaled that further rate hikes could follow in the period ahead. However, the Japanese yen weakened as markets expressed disappointment that the Central Bank’s policy guidance was not sufficiently forceful. The policy board under Governor Kazuo Ueda agreed to lift the policy rate by a further 0,25 percentage points to 0,75%. The BOJ cited improving economic prospects for Japan as the rationale for the rate increase, alongside data pointing to robust wage growth and a gradual easing of risks stemming from U.S tariffs. Following Governor Ueda’s remarks, the JPY weakened to below 157,1 per dollar from around 155,8, suggesting that markets are awaiting clearer signals from the BOJ to validate the likelihood of additional tightening. On Friday, data showed that Japan’s consumer price index rose 3% year on year in November, extending the streak of months in which inflation has met or exceeded the BOJ’s 2% target to 44 consecutive months. Markets are currently pricing in further BOJ rate hikes at a pace of roughly once every 6 months. As such, two additional hikes are anticipated in 2026 and another in 2027, which would lift the policy rate to around 1,5%. Most recently, the Japanese Government intervened in the foreign-exchange market in July 2024, when the USD/JPY exchange rate reached 161,96, the highest level since the mid-1980s.

The USD Index rose 0,3% last Friday, marking its third consecutive day of gains. Domestically, the USD/VND interbank exchange rate edged down to 26.315 by the end of the week, despite having climbed back to as high as 26.360 earlier in the week. The downward trend in the exchange rate is expected to continue to be supported by stronger short-term demand for the VND in the interbank market, as many major global markets prepare to enter the year-end holiday period of 2025.

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