#重磅 The Bank of Japan's monetary policy meeting next week may confirm an interest rate hike to 0.75% and may signal the possibility of further rate increases in the future. The market expects that its final rate could reach 1.25%, implying that if an increase occurs next week, there will still be about 50 basis points of room for further hikes. This shifts the trading focus from "single rate hike" to "multiple rate hike expectations," intensifying concerns about the narrowing of the interest rate differential between the US and Japan.

The impact of the US-Japan interest rate differential focuses on arbitrage trading, especially 2-year government bonds (JP02Y and US02Y). Currently, Japan's 2-year interest rate is about 1%, while that of the US is around 3.5%, maintaining a significant nominal differential. Even if Japan raises rates by 25 basis points, the short-term real narrowing effect is limited, so the initial impact is more emotional.

However, if the meeting conveys a stronger signal for future rate hikes, or combines with market expectations for a rate cut in the US dollar, concerns about the accelerated narrowing of the interest rate differential may be amplified, requiring caution regarding emotional fluctuations.

It should be noted that the short-term narrowing of the US-Japan interest rate differential may trigger a capital flow back to the yen and tighten liquidity, putting pressure on the market, but this is considered "growing pains." In the medium to long term, this is not a systemic negative, and after passing through the initial adjustment phase, the financial market may welcome a more sustainable easing environment.

In summary, the yen interest rate hike next week is more likely to cause short-term emotional disturbances rather than cyclical harm. #日本加息