Tokyo's latest inflation data has been released, and the market reaction has been quite intense. Core CPI has fallen to +2.3% month-on-month (previously +2.8%, market expectation +2.5%), while overall inflation indicators have declined to +2.0% (previously +2.7%), an unexpectedly sharp drop that caught many analysts off guard. Deep inflation data also continues to slow, reaching +2.6%.

At first glance, this is good news. Food and energy price pressures have clearly eased, but there is a key issue: core inflation still hovers above the 2% target, which is precisely where the Bank of Japan (BOJ) finds itself truly challenged. As a barometer of the national economy, the trend in Tokyo's data suggests that nationwide inflation may also gradually slow down.

Contradictorily, despite inflation cooling, the BOJ remains steadfast in its stance to continue raising interest rates, which seems illogical. But the central bank's considerations go far beyond short-term data fluctuations. What is their true intention?

The BOJ's core goal is not simply to make inflation data fall in the short term but to establish long-term market confidence in a 2% inflation expectation. This means ensuring that inflation expectations can be stabilized above 2%, rather than merely pursuing a numerical decline. The shadow of three decades of low inflation still looms over the Japanese economy, and the central bank fears losing all previous efforts. Through continuous signals of rate hikes, they aim to send a clear message to the market: the era of low inflation is gone.

For the crypto world, this means that the global liquidity environment still carries uncertainties. The BOJ's policy orientation will influence the yen exchange rate, which in turn affects cross-border capital flows and risk asset allocations. Close attention must be paid to the interaction between the central bank's policy pace and actual data moving forward.