Nikkei Rises as BOJ Hikes Rate to 1.25%

The yen remained under pressure despite the policy shift, trading around 157 per dollar and leaving exporters with a tailwind. That currency backdrop helped offset worries that higher borrowing costs could eventually weigh on domestic demand.

On the market side, the Nikkei finished at 66,753.72, up from 65,481.27 the previous session, after briefly touching 66,946.14 intraday. The index is also holding well above its 50-day and 200-day moving averages, while the relative strength index sits in neutral territory, suggesting the rally has not yet reached the kind of stretched condition that often invites a sharper pullback.

The BOJ’s decision also lands against a firmer global rate backdrop, with the U.S. 10-year yield hovering near 5.3%, keeping pressure on Asia’s low-yield currencies. That leaves Japan equities caught between two forces: better earnings support from a weak yen and the risk that a faster pace of policy tightening eventually cools risk appetite.

The next catalyst is whether Governor Kazuo Ueda signals another hike after the holiday period. If he does, markets will likely test whether banks, exporters and AI-linked stocks can keep carrying the index, or whether higher rates start to bite.