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On 16 June 2026, the Bank of Japan has pushed policy rates to their highest level since 1995 while continuing with its quantitative tightening programme. Normally, tighter monetary policy would be expected to weigh on equity valuations by increasing borrowing costs and reducing liquidity. Instead, Japanese equities have continued to attract buyers, with the Nikkei 225 briefly trading above 70,000 following the latest policy decision. The divergence highlights how market expectations and policy predictability can matter as much as the direction of monetary policy itself.
David Scutt, FOREX.com APAC Market Analyst, specializes in analyzing the interaction between monetary policy, currency markets and asset prices across Asia-Pacific markets. His cross-asset approach provides unique insight into why Japanese equities continue to perform strongly even as the Bank of Japan maintains a tightening bias.
Nikkei 225 gains have continued even as the Bank of Japan delivers its most restrictive policy settings in decades. The policy rate now sits at 1%, while the central bank also chose to maintain its existing pace of balance sheet reduction rather than slow quantitative tightening. Scutt noted that market speculation ahead of the meeting focused heavily on whether policymakers would alter the programme, but they ultimately left it unchanged. Investors received few surprises from the announcement, helping the Nikkei 225 maintain its upward trajectory despite a tightening monetary backdrop.
Nikkei 225 momentum continues to reinforce the constructive outlook for Japanese equities. Following the Bank of Japan decision, the index briefly traded above 70,000 before retracing slightly, a move that Scutt said occurred while "the broader picture remains constructive". He also highlighted that the Nikkei continues to print higher highs and higher lows within a well-established uptrend. Investors appear increasingly focused on trend strength and technical support levels rather than viewing tighter monetary policy as a reason to reduce exposure to Japanese equities.
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--- Written by Frédéric Guétin, StoneX TV Producer
--- Expert: David Scutt, FOREX.com APAC Market Analyst
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