With US President Trump pushing forward a new round of tariff policies, uncertainty in the global market has significantly increased. The Trump administration has implemented more aggressive trade policies since taking office in January, undermining global trade confidence and affecting Japan's export industry.

The global economic outlook is rapidly deteriorating, bringing greater challenges to Japan. "- Nana Otsuki, Senior Researcher at Swiss Asset Management in Japan

Despite the uncertain global situation, there are still supporting factors in Japan's domestic economy, especially the impressive wage growth data. The largest labor union alliance in Japan has revealed that the increase in workers' wages this year has reached a 34 year high, breaking through for the second consecutive year.

Bond market volatility: The yield of Japanese 10-year treasury bond bonds continued to rise, hitting the highest level since 2008 last week, reflecting the market's rising expectations for future interest rate hikes.

Although the market generally expects BOJ to raise interest rates in the middle of the year, Governor Kazuo Ueda previously stated that he is "very concerned" about the global economy, which means policy adjustments may not be too urgent. The impact of the January interest rate hike still needs time to be evaluated.

Meanwhile, Japan is about to hold national elections, and government stability may affect central bank decisions.

In the past 9 times, BOJ made a decision to remain inactive, and 7 times the yen subsequently weakened. Due to market expectations that the Bank of Japan may continue to raise interest rates, long positions in the yen have significantly increased, and speculative bets have reached a historic high.

The dovish tone of BOJ may lead to a reversal of market sentiment and increase the pressure of yen depreciation in the short term. USD/JPY may test the 150 mark this week, and if the market interprets the policy as dovish, there may be even greater gains.

Trade tensions typically drive safe haven demand, theoretically benefiting the yen. However, due to the impact on the economies of the United States and Asian countries, global capital has flowed into the US dollar, putting pressure on the Japanese yen.

If the global economy continues to deteriorate, the Japanese yen may strengthen in the medium to long term as safe haven funds flow into the Japanese market.

Japan's 10-year treasury bond bond yield hit a new high since 2008, which reflects the market's bet on future interest rate hikes. However, as the Bank of Japan has not provided a clear timetable for interest rate hikes, the market may adjust its expectations and the yen may weaken in the short term.

If the Bank of Japan releases a stronger signal in the future, the yen may strengthen again.

Future prospects:

The market expects a rate hike as early as May 1st, but it still depends on data performance. If inflation and wage growth remain strong, BOJ may continue to maintain its interest rate hike trajectory, with the target interest rate possibly rising to 1.25%.

If trade tensions escalate, it may lead to BOJ being more cautious and delaying interest rate hikes.

The BOJ decision did not provide a clear signal of interest rate hike, and the US dollar may break through the 150 level against the Japanese yen. If the BOJ takes a tough stance in the future, it may drive a short-term rebound of the yen, but the overall trend still depends on the Federal Reserve's policies and the global trade situation.

The decision of the Bank of Japan this week indicates that it is adopting a cautious attitude and is not in a hurry to further raise interest rates in the context of increasing global economic uncertainty. The market is paying attention to future policy guidance, especially whether the May meeting will release clearer signals of interest rate hikes.

At the same time, the Japanese yen exchange rate, bond yields, and wage growth data will become key variables affecting market expectations. In the short term, the Japanese yen is facing depreciation pressure, and the US dollar may test the 150 level against the Japanese yen; However, there is still potential for hedging in the medium to long term, and attention should be paid to changes in the global market.