I have analyzed the relationship between Japan's interest rate hike cycles over the past few decades and the stock market, and I have discovered some interesting patterns.

Since the mid-1980s, Japan has experienced multiple rounds of rate hikes, each bringing different market reactions. The most notable was the wave in 1989—five consecutive rate hikes to curb the asset bubble. After the first hike, the Nikkei still rose for half a year, reaching 39,000 points. It was only after the third hike that a turning point occurred, leading to a 30-year downward trend, with the Nikkei dropping nearly 40% in 1990 alone.

The situation in 2000 was somewhat different. A single 25 basis point hike in August was followed by a delayed market response; the market plunged rapidly a month later. Amid the burst of the dot-com bubble in the US, the Nikkei declined nearly 40% from September 1990 to September 2001.

The 2006-2007 cycle was even more intense. The first rate hike in July 2006 saw the Nikkei continue to rise for another six months. After a second hike in February 2007, the market began to crash, losing nearly 50% between 2007 and 2008. The US subprime mortgage crisis further amplified the decline.

In the recent 2024-2025 cycle, the market's sensitivity to policy changes has clearly decreased. After the first hike in March 2024, the Nikkei dipped slightly but quickly recovered, reaching a new all-time high. The unexpected second hike in July 2024 triggered a historic plunge, but the market stabilized after the central bank signaled a cautious stance. In January 2025, the rate hike was fully anticipated, and the index only fell slightly by 0.3%.

Looking at this evolution, the actual impact of policy is gradually weakening, and the market's adaptability is increasing. Proper risk management and focusing on spot trading remain the prudent strategies.