iShares MSCI Pacific ex Japan ETF

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TOKYO—Japan didn't step into foreign-exchange markets in the past month, as repeated verbal warnings and historic intervention during the summer helped the yen regain some strength.

The yen extends its drop against the dollar after BOJ Governor Ueda gave mixed signals about future interest-rate hikes. The central bank lifted interest rates by a quarter point to 1.25%.

The yen is back in focus after mixed signals from a widely expected interest-rate hike from the Bank of Japan.

The bank of Japan delivers a quarter point hike, taking rates to the highest level since 1995. But two dissenting votes raise doubts around further normalization, driving the Yen and JGB yields lower.

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The BOJ raised its policy rate by 25 basis points to 1.25%, its highest since 1995, just three months after its previous hike. Despite the faster pace, the yen weakened, the 10-year Japanese government bond yield slipped and the Nikkei 225 gained.

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Goldman Sachs' Timothy Moe remains structurally bullish on Japanese equities, but sees a more challenging near-term outlook as the Bank of Japan normalizes policy.

The last time Japan's central bank lifted its main policy rate half a percentage point, prices were so hot the land the Imperial Palace sat on was said to be worth more than the combined ​real estate of California.

The yen's surge may be signaling something much bigger than another carry-trade scare: the price of Japanese capital is changing. For the first time in decades, rising JGB yields are making it increasingly rational for Japanese investors to keep more money at home.