Analysis of the Impact of the Bank of Japan's January Monetary Policy Decision on Asia-Pacific Markets

Based on collected market data, news information and real-time quotes, I have prepared this in-depth analysis report on

.

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The Bank of Japan announced on January 23, 2026 that it would keep its policy interest rate unchanged at

, a decision in line with broad market expectations[1][2]. Previously, the Bank of Japan had raised interest rates by 25 basis points at its December 2025 meeting, lifting rates to their highest level in three decades[3]. The inaction at this meeting reflects the decision-makers’ need for more time to assess economic data and policy effects.

According to market intelligence, the Bank of Japan may

in the quarterly outlook report of this meeting, with an expected upward revision from 0.7%[4]. This adjustment reflects:

• Fiscal stimulus expectations
  : Expectations of expansionary fiscal policies from the new Sanae Takaichi administration support economic growth
• Inflation stickiness
  : Although December CPI data shows inflation has cooled slightly, core inflation is still expected to stabilize above the 2% target range
• Wage growth
  : The outcome of spring labor-management negotiations will be a key variable determining future policy direction

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The USD/JPY exchange rate has been under sustained pressure recently, once approaching the

and hitting around 159.8, a two-and-a-half-year high[5]. The current exchange rate fluctuates in the 158-159 range, reflecting the yen’s depreciation pressure against the backdrop of widening U.S.-Japan interest rate differentials.

Exchange Rate Level	Implication
158.9	Current exchange rate (January 23, 2026)
160.0	Key psychological level (2024 high)
155.0	Potential BOJ intervention range

1. Widening U.S.-Japan interest rate differential
   : The Federal Reserve maintains a high-interest rate policy, while the Bank of Japan has only raised rates slightly, keeping the interest rate differential at around 2.7-2.9 percentage points
2. Active carry trades
   : The yen’s role as a funding currency continues to strengthen, with investors borrowing yen to purchase high-yield assets
3. Political uncertainty
   : The Japanese Prime Minister’s announcement of a snap election has sparked market concerns about fiscal sustainability[6]

Frances Cheung, Head of Foreign Exchange and Interest Rate Strategy at OCBC Bank, pointed out that any more firm remarks from the Bank of Japan on wage increases could mean earlier policy action[5]. If spring wage negotiations continue the strong growth of the past two years, the central bank may raise interest rates by another 25 basis points as early as March 2026.

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The Nikkei 225 performed steadily in January 2026, with the latest closing at

, near its all-time high[7]. It has risen by approximately since January, reflecting market confidence in Japan’s economic recovery.

Indicator	Value
Latest Close	53,907.96
Interval Gain	+3.79%
Interval High	54,341.23
Interval Low	51,367.98

• Bank stocks
  : Widening interest rate differentials help boost loan profit margins, and Japan’s three major bank stocks generally strengthened
• Export-oriented enterprises
  : Yen depreciation enhances export competitiveness

• Import-dependent enterprises
  : Yen depreciation increases import costs
• Government bond holders
  : Rising yields lead to falling bond prices

: The latest closing price was 3,606 yen, rising 0.61% on the day, demonstrating the sensitivity of the automobile manufacturing industry to yen depreciation[8]. As one of Japan’s largest exporters, yen depreciation directly increases the repatriated value of its overseas earnings.

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1. Risk sentiment transmission
   : Yen trends affect global capital risk appetite
2. Carry trade unwinding
   : Expectations of yen appreciation may trigger unwinding transactions, causing market volatility
3. Capital flows
   : Changes in the attractiveness of yen assets affect international capital allocation

Alibaba closed at

on the day, rising 2.61%[8]. As an important component stock of the Hong Kong stock market, its performance reflects:

• The overall risk appetite of the Hong Kong stock market is relatively stable
• Chinese tech stocks show certain resilience in the Asia-Pacific market
• Investors’ recognition of the valuation attractiveness of Hong Kong stocks

Market consensus expects that if the Bank of Japan releases hawkish remarks to support the yen, it may:

• Short-term
  : Trigger carry trade unwinding, causing short-term shocks to the Hong Kong stock market
• Medium-term
  : Moderate yen appreciation reduces global deflation expectations, benefiting risk assets

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Yen carry trades have driven the yen down by more than

over the past eight months, and are currently in an all-time high range[9]. The core logic of this trading strategy is:

Borrow low-interest yen → Buy high-yield assets → Earn interest rate spread

Risk Type	Trigger Condition	Potential Impact
Rapid exchange rate appreciation	Sudden yen appreciation of more than 5%	Trigger chain unwinding
Unexpected policy tightening	BOJ raises interest rates sharply ahead of schedule	Narrowing interest rate differential
Deterioration of risk sentiment	Global market turmoil	Risk asset sell-off

Strategists from institutions such as JPMorgan Chase and BNP Paribas predict that driven by the U.S.-Japan interest rate differential and negative real interest rates, the yen exchange rate may weaken to 160 or even lower by the end of 2026[10]. Although the Bank of Japan is raising interest rates, the structural factors behind yen depreciation still exist.

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• Monitor the hawkishness of the Bank of Japan’s policy statements
• If the yen breaks below the 160 level, be alert to the risk of intervention by Japan’s Ministry of Finance
• Consider allocating yen call options to hedge against unexpected appreciation risks

• Focus on the outcome of spring wage negotiations
• Evaluate the impact of Japan’s fiscal stimulus policies on the economy
• Accumulate positions on dips in sectors that benefit from moderate yen appreciation

• High-dividend blue-chip stocks: Provide cash flow and valuation protection
• Tech leaders: Have valuation appeal, focus on Alibaba, Tencent, etc.

• New energy sector: Benefits from the global green transformation trend
• Consumption upgrade: Focus on targets related to domestic demand recovery

1. Exchange rate hedging
   : Investors with yen exposure consider using foreign exchange forwards or options
2. Volatility strategy
   : Buy Nikkei 225 volatility index funds to cope with uncertainty
3. Diversified allocation
   : Diversify investments in the Asia-Pacific market to reduce single-market risk

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Time Node	Expected Event
January 2026	Keep interest rates unchanged, but release hawkish signals
March 2026	Spring wage negotiation results announced, which may trigger an interest rate hike
H2 2026	If inflation stabilizes above 2%, another interest rate hike may occur

• Japan’s economic recovery exceeds expectations
• Improvement in global risk sentiment
• Fiscal stimulus policies effectively boost growth

• Rapid yen appreciation triggers carry trade unwinding
• Slowdown in global economic growth
• Rising geopolitical uncertainty

1. Yen exchange rate
   : Whether the 160 level is breached
2. Nikkei 225 index
   : Whether it can break through the all-time high
3. U.S.-Japan interest rate differential
   : Government bond yield trends
4. Spring wage negotiations
   : Wage growth data

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The Bank of Japan’s decision to keep interest rates unchanged is in line with market expectations, but its upward revision of economic outlook and potential hawkish policy stance will have complex impacts on the Asia-Pacific market.

and are the current key focuses. For investors, while enjoying the benefits of yen depreciation for export enterprises, they need to be alert to potential exchange rate fluctuation risks and maintain appropriate hedging of their investment portfolios.

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[1] Investing.com - “Bank of Japan Expected to Keep Interest Rates Unchanged, but Focus on Hawkish Remarks Amid Yen and Fiscal Issues” (https://cn.investing.com/news/economy-news/article-3176363)

[2] Xinhua Finance - “Bank of Japan May Release Hawkish Signals at January Meeting to Stabilize the Yen” (https://finance.sina.com.cn/money/bond/2026-01-22/doc-inhieikv7339889.shtml)

[3] FX678 - “Bank of Japan Monetary Policy Meeting Schedule” (https://bank.fx678.com/BOJ)

[4] Hexun.com - “Bank of Japan: May Upgrade FY Growth Outlook in January, Raised Rates to 0.75% Last Month” (https://m.hexun.com/stock/2026-01-09/223100450.html)

[5] OCBC Bank Foreign Exchange Strategy Analysis (https://finance.sina.com.cn/money/bond/2026-01-22/doc-inhieikv7339889.shtml)

[6] Investing.com - “Bank of Japan January Preview” (https://hk.investing.com/news/economy-news/article-1279409)

[7] Gilin API Market Data (January 23, 2026)

[8] Gilin API Real-Time Quote Data (January 23, 2026)

[9] MoneyDJ - “Yen Plunges, Approaching 160 Level; Carry Trade Alarm Rings” (https://www.moneydj.com/r/news/rnews_{A3EA9DC2-4E11-45B9-B86E-7E1ED9F43F4E}_6_A.djhtm)

[10] AASTOCKS.com - “Affected by the Bank of Japan’s Prudent Policy, the Depreciation Trend May Extend to 2026” (http://www.aastocks.com/tc/stocks/news/aafn-con/GLH2227539L/popular-news/GLH)

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The chart above shows the comprehensive reaction of the Asia-Pacific market to the Bank of Japan’s January monetary policy decision, including:

• Top left
  : USD/JPY exchange rate trend and key psychological level (160)
• Top right
  : Nikkei 225 index near all-time high
• Bottom left
  : Hong Kong Hang Seng Index steadily recovering
• Bottom right
  : U.S.-Japan interest rate differential and carry trade risk assessment