A few days ago, it was said that the market faces risks. In fact, the core reason is not the rate hike in Japan itself, but the market's overreaction. Frankly, Japan's 25 basis point rate hike this time was already priced in beforehand; by early December, it was already consensus. What truly makes the market nervous is the expectation of "continuous rate hikes"—Japan's inflation is indeed present.

But looking at the yen and inflation data can shed some light. Japan's rising prices are largely driven by the dollar rate hikes. Over the past two years, the dollar has depreciated significantly, and from September to December 2025, the Fed is expected to cut interest rates three times. Naturally, Japan's CPI will have room to decline as well. While Japan's economic conditions do have an impact, when considering inflation factors, the GDP growth rate from 2020 to now isn't particularly impressive.

Looking at the schedule, Japan plans to raise interest rates to 0.75% by December 19, which is the highest in nearly 30 years. Reviewing the pace of this rate hike cycle: in March 2024, from -0.1% to 0%; in January 2025, from 0% to 0.5%; and then in December, to 0.75%. The intervals are generally around 10 to 11 months. In other words, even if Japan has a plan for continuous rate hikes, it won't happen immediately in quick succession.

From a risk-avoidance perspective, both the yen and US Treasuries are safe-haven assets. During systemic collapses like the 2008 financial crisis and the 2020 pandemic, demand for the yen surged. Currently, the US shows some signs of recession, but it hasn't reached crisis levels. The 2-year US Treasury yield has already been suppressed, but the 10-year yield remains above 4%. Short-term market risk aversion towards the yen may not be as strong as imagined.

In simple terms, Japan's rate hikes mainly cause emotional fluctuations. There might be some movement on the day of the announcement, but the probability of continuous rate hikes in the coming months is low. Conversely, if the US continues to cut rates, it could actually help Japan's inflation to decline further. The market's worries might be a bit exaggerated.