The view that yen depreciation will continue in 2027 has been expressed, with concerns raised over the risk of rising interest payments on government debt. The Bank of Japan’s rate hikes and the lack of funding sources are cited as background factors, and concerns over prolonged yen depreciation are expected to intensify.
In 2026, dollar-yen reached a yen-depreciation level of ¥164, with historic milestones continuing amid coordinated intervention by Japan and the United States. Toru Sasaki (佐々木融) of Fukuoka Financial Group is analyzing the outlook for further yen depreciation. While the market expects further room for interest-rate hikes, yen-depreciation pressure may ease. It has also been suggested that the July 2027 meeting could prove to be an important turning point.
The Bank of Japan’s pace of rate hikes depends on market pricing, and the view has been expressed that raising real interest rates to near zero would help curb yen depreciation. However, the government’s outstanding debt is a major reason why the Bank of Japan may be unable to implement substantial rate hikes, increasing the risk of a sharp rise in interest payments.