This week, the Bank of Japan's interest rate meeting is imminent, and a rate hike has almost become a certainty. But does this necessarily mean the market will decline? I have a slightly different view.

The market's concern essentially revolves around a large-scale withdrawal of yen arbitrage funds, impacting risk assets. This logic seems reasonable on the surface, but a closer look reveals it doesn't hold water. Since Japan ended its negative interest rate policy in 2024, there have been multiple rate hikes—from 0% up to 0.5%, and potentially touching 0.75% in the future—all of which are significant adjustments. Compared to the Plaza Accord period, when Japanese interest rates plummeted from 5% to around 2.5%, the current rate adjustments still have considerable room to move. Interestingly, Japanese stocks have actually maintained an upward momentum during this rate hike cycle, and the outflow of funds triggered by each rate hike has been gradually weakening. The pattern is clear: the market is adapting.

Looking at the latest moves by the Federal Reserve—although the pace of rate cuts may slow down, the sudden increase of $40 billion in monthly bond purchases is essentially using liquidity tools to hedge against uncertainty. Rate hikes, balance sheet reduction, bond purchases… these are all regulatory tools aimed at managing the current investment environment's risks. Which tool will prove most effective? The market will provide the answer.

At the end of the day, investing is a long-term plan, not a short-term reaction. The true mindset for making money is to understand the nature of volatility, rather than being frightened away by short-term risks.