Yen Rises as BOJ Holds Rates and Plans ETF, REIT Sales

The Japanese yen strengthened against the U.S. dollar on Friday after the Bank of Japan (BOJ) kept interest rates steady at 0.5% but announced plans to sell holdings of exchange-traded funds (ETFs) and real estate investment trusts (REITs). The move unsettled investors, sending the dollar down 0.4% to 147.33 yen. The decision drew two dissenting votes, fueling speculation that rate hikes could come sooner than expected. Analysts now view the BOJ’s October 30 meeting as a potential turning point for a hike this year.

Earlier data showed Japan’s core consumer prices rose at the slowest pace in nine months, adding pressure on policymakers. Market participants are awaiting BOJ Governor Kazuo Ueda’s comments later Friday, though uncertainty ahead of the ruling Liberal Democratic Party’s leadership election—where Sanae Takaichi is seen as the frontrunner to succeed Prime Minister Shigeru Ishiba—may limit policy signals.

Meanwhile, global markets remain focused on U.S. monetary policy. The Federal Reserve’s recent rate cut has heightened speculation of further easing, with futures pricing showing over 90% odds of another 25-basis-point cut in October. Political tensions also weigh on sentiment, with the Trump administration pushing the U.S. Supreme Court to uphold sweeping tariffs and even seeking authority to fire a Fed governor—moves that raise concerns about central bank independence.

The euro slipped 0.1% to $1.1773, sterling eased to $1.3544 after the Bank of England slowed its bond run-off program, and the New Zealand dollar extended losses following weak GDP data. The offshore yuan traded at 7.1104 per dollar, while the Australian dollar slipped to $0.6601. Investors remain cautious, weighing central bank actions, trade policy uncertainty, and political risks across major economies.