The yen weakens even after a rate hike, while yen appreciation after intervention is only temporary, as policy differences between the government and the BOJ begin to constrain efforts to defend the currency [Japan’s FX market through the eyes of Karakama Daisuke (唐鎌大輔)] The BOJ’s “Summary of Opinions” reveals a gap with the government, bringing the policy issues for 2027 into sharper focus as the neutral rate approaches

The yen weakened sharply on 1 October. While the outlook for rate hikes and views suggesting confidence that the inflation target was being achieved were expressed in the Summary of Opinions following the monetary policy meeting, views became widespread that remarks calling for the government to explain its position were treated as a market factor.

The government's stated position was reportedly that future policy management should be considered in light of the neutral rate estimated by the BOJ, and called for an appropriate response to curb excessive fluctuations in the economy and markets. This further complicated market attention to the yen's depreciation and the BOJ's rate-hike path.

The handling of the Outlook Report following a review of the neutral rate is expected to be a key focus of the BOJ's future policy debate. Many believe that whether to implement an additional rate hike should be considered cautiously, and some assess that an additional decision at the October meeting has become more difficult.