Tokyo: Despite a key interest rate hike aimed at fighting inflation, the Japanese yen tumbled to near 158 against the US dollar on Friday.

According to Anadolu Agency, the JPY/USD exchange rate touched 158 during the day and stood at 157 as of 1527GMT, compared to 153 around a week ago. The Bank of Japan raised its target interest rate by 0.25 percentage points to approximately 1.25%, pushing borrowing costs to a 31-year high.

BoJ Governor Kazuo Ueda indicated the possibility of further rate increases, emphasizing the importance of controlling underlying inflation to prevent it from exceeding the central bank's 2% target. However, the 7-2 split vote among policy board members created uncertainty about the central bank's commitment to further tightening, contributing to the yen's 1.3% decline.

The rate hike marks a continuation of the Bank of Japan's gradual shift away from its longstanding ultra-loose monetary policy, which began with the termination of its negative interest-rate policy in March 2024.