$UNI recent trend $ACT market the Bank of Japan's move is somewhat extreme. On December 19th, it unanimously passed the interest rate hike decision, raising the short-term interest rate by 25 basis points to 0.75%, the strongest rate hike since 1995. Initially, it was a good strategy to stabilize the Exchange Rate and curb prices, but instead, it led to a "collapse-like" fall of the yen.

How could this happen? After the interest rate hike was announced, the USD/JPY surged directly to 157.76, reaching a four-week high, with the daily increase being the largest since early October. The JPY hit new lows against the EUR and CHF, and has returned to levels not seen since 2008 against the GBP. This contrast is quite significant.

Upon closer inspection, there were already signs of this result. The market had already digested the interest rate hike news, and when it actually came, it was more about "buying the expectation, selling the fact," leading to capital flight. Even more painfully, the Bank of Japan Governor Ueda spoke very cautiously, emphasizing that the actual interest rate is still very low, and was vague about future interest rate hikes, which was directly interpreted as "soft rate hikes." Moreover, with a 300 basis point interest rate differential between the US and Japan, the $19.2 trillion carry trade continues to suppress the yen, which the yen obviously cannot withstand.

There are currently two key positions. First, the salary negotiations in the spring of 2026, where the union has set a target of a 5% salary increase, and the starting salaries for new graduates have reached new highs, paving the way for the Central Bank to continue raising interest rates. The other is the red line at 160, where the USD/JPY is about to touch. The Chancellor has made it clear that action will be taken against "excessive volatility." But to be honest, intervening with 9.8 trillion yen in 2024 will only be a fleeting moment.

The consensus in the industry is that this interest rate hike is merely a slight adjustment during the easing period, and there is basically no chance of another hike before June next year. The weak yen situation may continue. The Bank of Japan is truly caught in the middle, facing a dilemma with an economic burden of debt that is 2.3 times GDP on one side and the risk of a currency collapse on the other.

The 98 trillion yen intervention has not been able to reverse the situation. Can Japan hold 160 this time? What do you think, is the yen a bottom-buying opportunity or will it continue to weaken?