Background
Abenomics and the yen in 2013
When “Abenomics” was launched at the start of 2013, the Japanese yen was significantly overvalued. Koichi Hamada notes that at that time “looser monetary policy was badly needed” to support growth and price stability.
Shift in 2026
“Today, the opposite is true, indicating that interest‑rate hikes may well be the right prescription for Japan.” – Koichi Hamada, Project Syndicate, 9 July 2026
Hamada’s observation points to a reversal in the yen’s valuation: the currency is now perceived as undervalued, prompting a reconsideration of the Bank of Japan’s ultra‑easy stance.
Market Implications
Potential policy tightening – If the yen’s undervaluation persists, the BOJ could move from its long‑standing negative‑rate policy toward modest rate hikes.
Currency dynamics – A policy shift may strengthen the yen, affecting export margins and import‑price inflation.
Investor positioning – Fixed‑income traders might adjust exposure to Japanese government bonds, while equity investors could reassess sectors sensitive to currency swings, such as automotive and technology exporters.
Analytical Takeaway
Hamada’s brief underscores a strategic inflection point for Japan’s monetary framework. The transition from an overvalued yen in 2013 to an undervalued yen in 2026 suggests that the BOJ’s historically accommodative policy may no longer be appropriate. Market participants should monitor forthcoming BOJ communications for signals of a possible rate‑increase trajectory.
Source: Koichi Hamada, “Should the Bank of Japan Raise Interest Rates?” Project Syndicate, 9 July 2026.