The new official took office three times. Japan's new prime minister, Ishiwari Shigeru, was the possibility of a change in position, changing his previous image of supporting interest rate hikes as a hawkish interest rate policy.

On Wednesday, October 2, local time, Ishiwari Shigeru said on the second day after being elected prime minister and the first day the new cabinet took office that Japan's current environment is unsuitable for further interest rate hikes, and the economy is not ready for further rate hikes. After meeting with Bank of Japan Governor Kazuo Ueda for the first time as prime minister, he said:

“I don't think we're in an environment where we need to raise interest rates any further.”

“I don't think the current environment is suitable for further rate hikes. I told the (central bank) governor that I hope, in the context of monetary easing, the economy will move towards ending deflation in a sustainable manner.”

It was later commented that this was the clearest statement by Shigeru Ishida against further interest rate hikes so far. The move was clearly an attempt to get rid of his reputation as a hawkish monetary-policy person. He also told the media in August of this year that gradually raising ultra-low interest rates would help improve Japan's profitability.

Ishiwari Shigeru's remarks on Wednesday shook the yen exchange rate, and investors quickly reacted to the possibility that Japan's new government would put the brakes on interest rate hikes.

After Shigeru Ishiwari's speech, the intraday decline of the yen accelerated this week. After the announcement of the number of people employed in the US “small non-farmers” — private sector ADP, which had grown beyond expectations, the yen's decline widened further. During the early trading session of the US stock market, the US dollar rose to 146.26 against the yen, breaking the high level since last Friday in September. It was close to the high level set on Friday since September 3. The intraday decline widened to about 1.9%, the highest decline among G10 national currencies.

Some commentators mentioned that before Ishiwari Shigeru's speech, the Bank of Japan sent out a series of signals on Tuesday, his first day in office, implying that the new government is not in a hurry to raise interest rates. Cabinet ministers also downplayed Shigeru Ishiwari's interest in normalizing monetary policy, stressing that the central bank needs to focus on unfinished tasks to eliminate deflation.

Wall Street News notes that Ishiwari Shigeru's cabinet minister in charge of economic revitalization Akazawa Ryomasa said on Wednesday that he hoped the Bank of Japan would be cautious about further interest rate hikes. Akazawa said that the Bank of Japan's current policy interest rate of 0.25% is “abnormal by global standards,” but Japan's top priority is “getting rid of deflation.”

After meeting with Shigeru Ishiwari on Wednesday, Kazuo Ueda said he told Ishiwari that the Bank of Japan would carefully decide whether to raise interest rates further. “I told the Prime Minister that we are supporting the economy through an easy monetary environment.” He went on to say that if economic and price developments are in line with the central bank's predictions, the central bank will raise interest rates.

Lee Hardman, a senior foreign exchange analyst at Mitsubishi UFJ Financial Group, commented that Ishiwari Shigeru's attitude will encourage market participants to rebuild short positions in the yen. It is expected that the Bank of Japan will be under greater political pressure to slow down the pace of interest rate hikes. Hardman also said that the sharp strengthening of the yen and increased financial market instability this summer helped mitigate the upward risk of inflation in Japan.

In August of this year, due to concerns about a slowdown in the US economy, the market's expectations for the Federal Reserve to relax its monetary policy rose, and the Bank of Japan began to raise interest rates, narrowing the interest rate gap with the US. So-called arbitrage transactions were hit hard as a result. Bets using yen as a financing instrument were narrowed down miserably.

Currently, most Bank of Japan observers expect that at the monetary policy meeting that ends on the 31st of this month, the Bank of Japan will keep the benchmark interest rate unchanged, and the next rate hike will most likely occur in December or January next year.