Around Christmas, the Bank of Japan may take serious action. This week’s policy meeting has already been filled with expectations of rate hikes, and the driving force behind this is, frankly, that the yen is "too soft."

Economist Alicia Garcia Herrero pointed out that the yen against the US dollar has been oscillating around 155, and imported inflation pressures are rising accordingly, making both the central bank and the government a bit uneasy. Although tariffs and geopolitical risks are still hanging over the economy, Japan’s economic resilience has indeed exceeded expectations.

The data makes this clear. In terms of inflation, both short-term and long-term expectations have broken through the 2% threshold set by the central bank, with food prices continuously pushing up core inflation. On the export front, the growth is even more impressive—up 6.1% year-over-year in November, surpassing expectations. Exports to the US increased by 8.8%, and exports to the EU are approaching a 20% growth rate, indicating that demand from Europe and America is pulling Japan’s economy upward.

Market consensus is that the Bank of Japan will raise its policy interest rate to 0.75% on December 19, a 25 basis point hike. If the yen doesn’t stabilize after this move, further increases may be needed early next year. Former Deputy Governor Masazumi Wakatabe did remind us—caution should be exercised when assessing the neutral interest rate, and policy tightening should not be too rapid or aggressive.

The key question is: how will this shift in the central bank’s stance affect the entire Asian financial market? Can the yen really rebound by riding this momentum? What are your thoughts?