The Bank of Japan recently announced an increase in the policy interest rate to 0.75%, reaching the highest level in 30 years. This decision marks a significant shift in Japan's monetary policy. The once dovish stance has been completely reversed, and the rate hike cycle has just begun, with further increases expected.

There are four core drivers behind this decision. First, the inflation rate has consistently exceeded the 2% target, becoming a normalized phenomenon, while real interest rates have remained in negative territory. This distorted price signal has forced the central bank to take action. Second, the long-term weakness of the yen has led to a continuous rise in import prices, prompting officials to frequently state the need to accelerate the rate hike process. Third, the end of the three-decade-long negative interest rate era has officially arrived, with large amounts of arbitrage capital beginning to withdraw, causing turbulence in the stock, bond, and foreign exchange markets simultaneously. Fourth, the current interest rate level still has room for further adjustment, as it remains below the neutral level.

The global ripple effects of this rate hike are already evident. Yen volatility has surged rapidly, and gold is regaining popularity as a safe-haven asset. The global liquidity landscape is changing, no longer dominated solely by the Federal Reserve, with the Bank of Japan's policy adjustments becoming a key variable. Yen carry trades worth trillions are facing re-pricing risks, and US dollar assets, US bonds, and emerging markets all need to be reassessed. In such a market upheaval, genuine opportunities are often hidden within risks.