The Bank of Japan will hold a monetary policy meeting today and tomorrow, with the results announced on the 19th! My personal judgment is that the probability of a rate hike is very high, which is also the main negative factor suppressing risk assets recently! The market has already partially priced in this expectation last night, and with the CPI data to be released at 21:30 tonight, the recent market is likely to be particularly volatile and very interesting!

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

1. Monetary Policy Meeting Logic

Previously, many institutions borrowed low-cost Japanese yen for a long time and exchanged it for USD to allocate to other high-yield assets. If Japan raises interest rates this time, on one hand, borrowing costs will directly increase; on the other hand, the yen is likely to strengthen significantly. This arbitrage trade will lose its profitability—institutions will accelerate selling various assets to buy back yen to repay loans, thereby exerting downward pressure on risk assets.

2. CPI Data Logic

The core of CPI reflects price changes: inflation below expectations → the probability of the Federal Reserve cutting interest rates in January increases → the attractiveness of the USD decreases → funds will flow into other high-yield assets; inflation above expectations → the Federal Reserve may delay rate cuts → funds will withdraw from various assets and shift into USD, indirectly affecting the trend of risk assets.