The Bank of Japan will hold a monetary policy meeting today and tomorrow, with results announced on the 19th! My personal judgment is that the probability of an interest rate hike is extremely high, which is also the core bearish factor suppressing risk assets recently! The market has already digested part of the expectations last night, and combined with the CPI data to be released tonight at 21:30, the market is likely to be particularly volatile and extremely noteworthy!

Let's break down the core impact logic of the two pieces of news:

1. Monetary Policy Meeting Logic

Previously, many institutions have long "borrowed low-cost yen, converted it into dollars to allocate to other high-yield assets". If Japan raises interest rates this time, on the one hand, the cost of borrowing will rise directly, and on the other hand, the yen is likely to strengthen, which will completely eliminate the profit space for this arbitrage trade—institutions will accelerate the sale of various assets to exchange for yen to repay loans, thus putting pressure on risk assets.

2. CPI Data Logic

CPI core reflects price changes: lower-than-expected inflation → higher probability of Fed rate cuts in January → decrease in dollar attractiveness → funds will flow to other high-yield assets; higher-than-expected inflation → Fed may pause rate cuts → funds will withdraw from various assets and increase holdings in dollars, indirectly affecting the trend of risk assets.