The financial market in Japan at the end of 2025 is going to be explosive.

The Bank of Japan has finally taken real action—raising the benchmark interest rate to 0.75% for the first time in 30 years, and Finance Minister Katayama has made the strongest statements on currency market intervention in recent times. The government is showing a stance of stabilizing the market.

But the problem is that the market is not buying it at all. The yen against the dollar once approached the 157 mark, fluctuating violently yet still remaining extremely weak. The bond market is even more exaggerated— the yield on 10-year government bonds has directly crossed the 2% mark, reaching a 25-year high.

What is the most ironic part of this? The central bank is desperately raising interest rates, but the market is not responding positively. This set of measures should have stabilized the situation, but instead, it seems to be validating an old problem: the strategies used by Japan in the 1990s are no longer effective.

Looking back, Japan had its foundations even during tough times. Back then, it held onto the wealth accumulated during the economic boom of the 70s and 80s. But now? The situation has completely reversed—foreign relations are delicate, domestic policy signals are unclear, the interest rate differential structure has long been unchangeable, fiscal and monetary policies are still mutually restrictive, and debt is piling up like a mountain.

The end of the ultra-loose era means that Japan has to face a new triple dilemma: while climbing out of the deflationary mire, it must also endure the pressures of stagflation, combat the trend of monetary fiscalization, and fill the increasingly widening deficit gap.

This most severe financial market adjustment in 30 years essentially reflects the deep contradictions within the entire economic system.