The Bank of Japan may face its highest interest rate decision in over 30 years, and concerns about severe fluctuations in the yen have arisen as the deputy governor takes over

The Bank of Japan will hold a key monetary policy meeting next Tuesday, with the market widely expecting an interest rate hike of 25 basis points to 1%, marking the highest interest rate level since 1995 and signaling a further move towards normalization of Japan's monetary policy. However, uncertainty surrounding this meeting has significantly increased. Governor Kazuo Ueda will be absent from the meeting and the subsequent press conference due to health reasons, with communication responsibilities taken over by Deputy Governor Shinichi Uchida, raising market concerns about changes in policy wording and forward guidance.

Currently, the USD/JPY has risen above 160, nearing a two-year high and approaching the intervention zone. Traders generally believe that, given the market has fully priced in the interest rate hike expectations, the real key lies in the central bank's stance on the future path of interest rate hikes. Institutional analysis indicates that if the Bank of Japan releases dovish signals, it could further weaken the yen and push up Japanese government bond yields; conversely, if it shows a clearer tightening tendency, it would help stabilize exchange rate expectations.

At the same time, Japan is facing multiple constraints such as rising imported inflationary pressures, fluctuations in energy prices, and expectations of fiscal expansion, making the policy path more complex. The latest data shows that Japan's core inflation has risen to 3.5%, reaching a new high for this phase. Analysts believe that this meeting is not only a point for interest rate adjustments but may also serve as an important observation window for changes in the Bank of Japan's policy communication framework, with the Deputy Governor's statements directly influencing the short-term direction of the yen and global interest rate markets.