The recent year-end speech by Bank of Japan Governor Kazuo Ueda has attracted attention—his tone is noticeably hawkish, stating that rate hikes are not over and that monetary policy normalization has become an inevitable trend. He is confident in the 2% inflation target, reasoning that rising wages are pushing companies to raise prices, and that the "zero interest rate normalcy" may truly become history.

This statement reveals a lot of information. Currently, the Japanese yen interest rate is at its highest level since 1995, but the market is still waiting for the next move. Ueda clearly does not want to suppress the yen, mainly worried that further depreciation would push inflation higher—this logic also makes sense.

But here’s a harsh reality: core inflation has exceeded 2% for nearly three years, yet household real income is shrinking. Even Japan’s Prime Minister Fumio Kishida has called on companies to raise wages. In this context, can rate hikes truly break the deadlock? Or will they lead to another kind of dilemma?

If the rate hike path continues into next year, it will have significant impacts on global liquidity. The rate hike cycle often reshapes asset allocation logic, and the traditional risk-off versus risk-on asset balance will also adjust accordingly. How this "storm" unfolds is indeed worth watching.