The footsteps of the Bank of Japan's rate hike are getting closer, and the latest internal signals suggest the timetable may come sooner than market expectations. What does this mean for global risk assets? Let's analyze it carefully.

The central bank's dilemma is quite tricky. Raising interest rates can combat inflation, but the government's debt burden will become heavier—at the same time, fiscal stimulus is pushing up prices, creating a tug-of-war. The exchange rate situation is also awkward; even with rate hikes, real interest rates remain negative, and the interest rate differential compared to major central banks like the Federal Reserve is still insufficient. The yen depreciation trend is likely to continue.

The key is the global impact. Japan is the last developed economy to exit ultra-loose monetary policy. Once rate hikes begin, global yen liquidity will tighten. This could cause trouble for traders who use yen for financing and arbitrage trading—risk assets worldwide might be affected.

Pay close attention to these rhythms:

The time window includes the January 22-23 meeting (market generally expects rates to stay unchanged) and the April 27-28 meeting (which could be the breakout point for rate hikes).

Core indicators to watch are the performance of the USD/JPY exchange rate, with the 160 psychological level being critical. The results of spring wage negotiations are also very important, as they directly influence the timing and stance of rate hikes. Fluctuations in Japanese government bond yields should also be monitored continuously.

Next week’s quarterly economic and price outlook report from the central bank will be very interesting.

In short, the yen exchange rate has become a core variable in the central bank’s decision-making. Its movement directly influences the pace of rate hikes. If you are trading or paying attention to crypto liquidity, this is a crucial factor to follow.