Amid views that leaving yen depreciation unchecked would allow inflation to continue, and that choosing to raise interest rates would increase the burden on mortgages and fiscal policy, this article examines the factors behind the yen's move toward appreciation and the BOJ's response.
The yen fell to the ¥160 range against the dollar in August 2026 before strengthening to around ¥156 in September. At the same time, the yen's appreciation is said to reflect a complex interplay of domestic and overseas factors.
Comments by a BOJ Policy Board member regarded as supportive of further rate hikes brought the possibility of an additional hike into focus, and the market responded by pushing the yen higher. One view expressed was that the yen had not been bought because of Japan's economic strength, but because expectations of higher interest rates had pushed it up.
US developments have also influenced the BOJ's actions, with comments by finance officials and speculation about Japan-US policy coordination cited as factors behind the yen's appreciation.
If yen depreciation is left unchecked, households in Japan, which is highly dependent on imports, are expected to face higher prices for daily necessities, gasoline and electricity, while food and energy price increases are also expected to continue. The resulting side effects, including higher mortgage costs and less fiscal flexibility, have also been highlighted, underscoring the difficulty of moving both policy levers at the same time.