The Bank of Japan just announced a 25 basis point rate hike, pushing interest rates to a 30-year high. This move is somewhat unusual—while central banks around the world are easing policies, Japan is taking the opposite approach.

Overview of data: Core CPI has exceeded the 2% target for 44 consecutive months, companies in the spring wage negotiations have promised wage increases exceeding 5%, and market expectations for rate hikes have been absorbed at over 90%. These indicators suggest that Japan is indeed facing inflationary pressures domestically.

Interestingly, after the rate hike announcement, the Japanese stock market did not plunge; instead, Asian stock markets generally rose. This reaction indicates that the market has already digested this expectation and may even be reassessing the attractiveness of Asian assets. Wall Street is closely watching Japan’s next moves.

This series of actions could trigger several chain reactions. First, the era of a cheap yen may gradually come to an end, and the high-yield yen arbitrage trades of the past might start to decline. Second, the depreciation pressure on other Asian currencies could ease. Finally, the global liquidity landscape faces reorganization—either countries follow suit and tighten policies or capital reallocates between Asia and other regions.

But don’t overlook one detail: the BOJ governor explicitly said, “There will be no consecutive rate hikes.” This suggests Japan’s stance is cautious; this rate hike appears more like a precise signal rather than the start of a series of rate increases.

The key now is to watch two directions. One is the actual wage data from next spring’s wage negotiations—if wage growth continues high, Japan may be forced to hike rates again. The other is the Federal Reserve’s trajectory—if the Fed also begins to consider tightening, the global liquidity turning point will truly arrive.

What do you think? Is this a clever preemptive move or somewhat risky? Where will capital flow next?