The Japanese yen has experienced a significant devaluation, currently falling to near the 147 level against the US dollar, which is almost the complete opposite of its previously strong upward trend that once broke through 140.

At the same time, the Japanese stock market has also seen violent roller coaster fluctuations in recent days.

Last Friday, it rose by 2.32%, and on Monday, the Nikkei 225 index fell sharply by 4.8%, which was the first time after Ishinomaki Shigeru was elected as the party leader, expressing the view that interest rates should not be raised.

On Tuesday, it rose by 1.93%, but on Wednesday, it fell again by 2.2%, and on Thursday, it opened up more than 2%. Almost every day in the past week has seen significant ups and downs.

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The violent fluctuations in the Japanese financial market are closely related to the shift in monetary policy after the new prime minister took office.

Before Ishinomaki Shigeru took office, judging from his past statements, he seemed to be a hawkish supporter of interest rate hikes.

However, in recent statements, his words have been ambiguous. On the one hand, he stated that he would adhere to monetary easing, and on the other hand, he also mentioned the normalization of monetary policy.

But after his meeting with the central bank governor, Ueda Kazuo, he clearly expressed that he did not want further interest rate hikes.

The former Japanese prime minister, under pressure from the Federal Reserve, completed two interest rate hikes in the past half year. The interest rate hike in March successfully turned negative interest rates into zero interest rates, and the interest rate hike at the end of July further raised the interest rate to 0.25%.

After the first interest rate hike, US Treasury Secretary Yellen once accused Japan of manipulating exchange rates, and the United States even listed Japan in the observation list for a period of time.It is evident that Japan was under immense pressure from the United States at the time. Several officials within Japan also indicated on multiple occasions that they would not raise interest rates again. However, surprisingly, they managed to withstand the pressure and suddenly completed the second interest rate hike at the end of July.

The effect of the interest rate hike was very significant.

In the previous years, the Japanese yen had been continuously depreciating, and the Bank of Japan spent a huge amount of money on two occasions to intervene in the market, but the results were not apparent. Instead, after these two interest rate hikes, the yen showed a noticeable appreciation, rising from a low of nearly 162 to 139.

The appreciation of the yen's exchange rate reduced the cost pressure of imports, and on the other hand, it was also beneficial for the increase in GDP.

It is worth noting that over the past few decades, the yen has remained low, and Japan's GDP has experienced several negative growths. It has now even been surpassed by Germany to become the fourth in the world.

However, comparing the economic performance of Germany and Japan, many analysts believe that once the yen strengthens, it will quickly reclaim the third position.

But now, it seems that this illusion has been shattered.

Now, Shigeo Ishihara has blocked the next round of interest rate hikes, which could very likely lead to another significant drop in the yen. The efforts made in the past may ultimately have been in vain.