DOMINANT ANGLE
Tokyo is measuring the widening gap in rates with Washington: the yen is slipping to 156 against the dollar, while the stock market is benefiting from a reprieve ahead of the Bank of Japan's monetary policy meeting.
Dominant angle identified — does not reflect unanimity of this country’s media
KEY POINTS
- 01
The Fed raised its target rate by 0.25 percentage point to 3.75-4.00%, the first increase since July 2023, a unanimous decision by the FOMC under Kevin Warsh.
- 02
The dollar traded at around 156.21-156.22 yen on Thursday in Tokyo, compared to 154.97-99 yen the previous day at 17h, on the back of an expected wider Japan-US interest rate gap.
- 03
The Nikkei gained 43.87 points (+0.07%) to 63,966.87 and the Topix added 29.34 points (+0.72%) to 4,091.06 on Thursday morning.
ANALYSIS
Tokyo, September 17, 2026. The US Federal Reserve raised its key interest rate by a quarter of a point on Wednesday, to a range of 3.75% to 4.00%, its first hike since July 2023, according to Kyodo News and The Mainichi. The decision by the Federal Open Market Committee (FOMC), taken unanimously under the chairmanship of Kevin Warsh, marks a reversal after several months where the rate had remained stable between 3.50% and 3.75% since December. Of the 18 officials who submitted new projections, 12 anticipate another quarter-point increase by the end of the year, four foresee two additional hikes, and two believe the rate will remain unchanged.
The FOMC statement mentions an economy that "is growing at a solid pace" despite increased uncertainty related to geopolitical developments, and states that inflation "remains high", above the 2% target for more than five years. Kyodo and The Mainichi link this inflationary push to the war waged against Iran by the United States and Israel since late February, which has driven up energy prices.
For Tokyo, the most immediate effect is seen on the foreign exchange market: the dollar was trading around 156.21-156.22 yen on Thursday, compared to 154.97-99 yen the previous day at 5 pm, with currency traders anticipating a widening gap between Japanese and American interest rates as the Fed hints at another hike. The euro was trading at 178.99-179.00 yen.
Despite this context, the Tokyo Stock Exchange opened slightly higher on Thursday morning, with uncertainty about economic prospects easing after a decision deemed in line with expectations: the Nikkei gained 43.87 points (+0.07%) to 63,966.87 points, while the Topix rose 29.34 points (+0.72%) to 4,091.06. Interest-rate sensitive stocks struggled to benefit from the move, while the decline in WTI crude oil prices supported market sentiment. The Japanese press notes that investors are primarily focused on the Bank of Japan, whose monetary policy meeting began on Thursday afternoon: for the archipelago, the issue is not the US decision itself, but the response that Tokyo's institution will provide.
