The Bank of Japan's latest rate hike decision has stirred up the global financial markets. The policy interest rate was raised from negative territory to 0.75%, sounding impressive, but the real interest rate remains negative—that's the "paper rate hike" in the eyes of the market. The underlying logic is quite clear: the Bank of Japan is walking a tightrope. On one side is a government debt amounting to 260% of GDP, and on the other, concerns about an economic recession. The Fed's previous aggressive rate hikes triggered a banking crisis, and Japan has evidently learned its lesson, opting for a cautious but gradual approach.

This "slow rate hike" strategy has a significant impact on global investors. First, the yen's appreciation expectations are not strong. The actual negative interest rate means limited attractiveness for the yen; don't expect a sharp rise in the short term. Second, the scope for interest rate arbitrage is shrinking. The previous strategy of borrowing low-interest yen to invest in U.S. Treasuries and U.S. stocks faces challenges, and the possibility of capital flowing back into Japan is increasing, which could put potential pressure on U.S. stocks and emerging markets. Investors holding yen assets can breathe a sigh of relief—the yield on Japan's 10-year government bonds has risen from 0.5% to 0.75%, increasing interest income, but the growth is limited.

The Bank of Japan has stated that it will not cut rates until inflation reaches the 2% target. Can this moderate pace of rate hikes truly stabilize the economy, or is it just superficial? The market remains cautious.