Ge Long Hui·2025-12-20 11:25Core Viewpoint - The Bank of Japan raised its policy interest rate by 25 basis points to 0.75% on December 19, indicating a cautious approach to interest rate hikes, which may lead to liquidity reversals in the yen and impact global financial conditions [1] Group 1: Interest Rate Impact - The Bank of Japan's interest rate increase is expected to maintain a highly restrained pace of future hikes, which may lead to a long-term suppression of global asset liquidity due to the reversal of yen carry trades [1] - Approximately $9 trillion in positions are still relying on low-interest yen for liquidity, which may gradually shrink as the interest rate differential between Japan and the U.S. narrows by the end of 2024 [1] Group 2: Japanese Government Fiscal Policy - The Japanese government has approved a supplementary fiscal budget equivalent to 2.8% of nominal GDP, which may exacerbate concerns in the market regarding fiscal expansion [1] - Plans to increase defense spending to 3% of nominal GDP and permanently reduce consumption tax may lead to a steeper rise in Japanese government bond yields in the medium to long term, accelerating the steepening of the yield curve [1]