Amid the recent surge of the US dollar, the Japanese yen exchange rate briefly fell below the 150 mark this week. However, with the public warning from Japan's top foreign exchange official and the latest reports, it is unlikely that the Bank of Japan will take any action at this month's policy meeting.

As background, the yen's depreciation began in 2021, falling from just over 100 to a nearly forty-year low of 160. With the Federal Reserve initiating interest rate cuts and the Bank of Japan entering an interest rate hiking cycle, the yen rapidly appreciated from July, and it is now in a state of correction.

Atsushi Mimura, the newly appointed Deputy Minister for International Affairs at the Ministry of Finance in June this year, warned on Friday that there have been some somewhat one-sided sudden fluctuations in the foreign exchange market. They will continue to monitor the foreign exchange market with a high sense of urgency, including any speculative movements. This year, Japan has spent more than 10 billion US dollars on foreign exchange market intervention, with the last intervention on July 12th.

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It is clear that the current situation is not urgent enough for the Ministry of Finance to intervene, leaving room for the Bank of Japan to "wait and see."

There is no need for hasty action.

According to informed sources, Bank of Japan officials believe that there is no need to rush to raise interest rates this month, given that inflation remains within the expected range, and rate hikes can wait for a later time.

In July, the Bank of Japan conducted its second interest rate hike of the year, an unexpected move that ignited global financial markets. Although it turned out to be a good buying opportunity, the turmoil it caused subtly made them more cautious about raising interest rates.

Informed sources also stated that there is little risk of inflation significantly exceeding the July quarter forecast, reducing the need for swift action. These officials also believe that it is necessary to monitor the potential impact of uncertainties such as the US economy and the upcoming US elections before taking the next step.

The latest data on Friday showed that Japan's CPI rose by 2.4% in September, marking the 30th consecutive month of meeting or exceeding the Bank of Japan's policy target.

The market widely expects that the Bank of Japan will maintain the benchmark interest rate at 0.25%, with more focus on signals for a rate hike in December. Informed sources revealed that it is difficult to predict how quickly the uncertainties surrounding global financial markets and the US economy will dissipate, so policymakers need to consider these factors at each meeting.Additionally, despite the recent depreciation of the Japanese yen against the US dollar, Japanese officials believe that the appreciation in July has helped to mitigate the upward risks of inflation.