The Japanese yen extended its decline against the US dollar after Bank of Japan Governor Kazuo Ueda delivered conflicting signals regarding the future trajectory of interest rate increases. Following the central bank's widely anticipated rate hike, Ueda stated during a briefing that the phase of monetary policy formulation has shifted, yet when pressed on the possibility of consecutive hikes or more aggressive moves, he refrained from pre-committing to any specific policy option ahead of upcoming board meetings.

"Ueda's press conference carried a slightly hawkish tone, but it fell short of supporting market expectations for a strongly hawkish stance," noted Chidu Narayanan, chief Asia-Pacific strategist at Wells Fargo. "In the near term, the lack of a hawkish BOJ posture combined with a stronger dollar rebound should keep the USD/JPY pair elevated and weigh on short-end yen yields."

The yen dropped nearly 1.2% to 157.77 per dollar. Although all economists surveyed by Bloomberg had predicted the rate decision, the 7-2 vote saw dissents from board members Toichiro Asada and Ayano Sato. Meanwhile, the Nikkei 225 index rose 1.4% as the weaker yen boosted exporter shares, while the Topix index remained largely flat, with financial stocks dragging on the broader market. Japanese government bonds were mixed, and spillover effects to other currencies and bond markets remained limited.

Prior to the BOJ's decision, the Federal Reserve's hawkish rate cut earlier this week had already pressured the yen, partially reversing a sharp rebound seen earlier this month. That recovery had been driven by expectations of faster BOJ tightening, unwinding of yen carry trades, and speculation that Japanese pension funds might shift more assets domestically.

Strategists suggest that if investors perceive the BOJ's tightening path as unable to keep pace with the Fed, the dollar could climb toward the 160 level. This risk is particularly pronounced given that markets had largely priced in the 25-basis-point hike, making any dovish interpretation of subsequent commentary a potential trigger for further yen weakness.

The latest decline has also reignited concerns about intervention risks. Japan and the US conducted their first coordinated yen-buying operation since 1998 this summer. While officials have emphasized the speed and disorderliness of currency moves rather than specific levels, a renewed push toward 160 could test their tolerance.

"If the yen comes under pressure again beyond 160 per dollar, we anticipate further joint intervention by Japan and the US," said Neil Newman, strategy head at Astris Advisory Japan. According to Japanese finance ministry data, Tokyo spent a record 15.4 trillion yen ($98.6 billion) on intervention in August through the 26th. Since then, US Treasury Secretary Scott Bessent has continued to signal support for a stronger yen, potentially complicating traders' efforts to rebuild bearish positions.