As Bank of Japan hikes, yen weakness looms as challenge

key takeaways

• The Bank of Japan (BOJ) raised rates as expected on 19 December, but the yen weakened.
• This suggests that exchange rates could be serving as a barometer of sentiment about fiscal policy as well as monetary policy.
• How political and monetary authorities manage yen weakness is emerging as a major issue for 2026, though Governor Ueda Kazuo expressed confidence in the resilience of Japan’s economy.