The Bank of Japan recently signaled a clear intention to raise interest rates — with real interest rates still deeply negative, and future hikes expected to occur "every few months." This seemingly calm policy shift, however, hints that Japan's era of ultra-loose monetary policy may truly be coming to an end.

Once the rate hike cycle begins, the chain reactions could be quite significant. Japanese government bond yields will rise, international capital will flow back into Japan seeking returns, and global capital flows may thus be reshaped. Short-term, the stock market is likely to face pressure, but the medium to long term depends on whether corporate profits can keep pace.

The real economy also has two cards to play. Rising borrowing costs will dampen investment and consumption, but if corporate wages continue to grow, domestic demand resilience might be able to withstand some pressure. The central bank needs to find that delicate balance between "controlling inflation" and "stabilizing the recovery."

What is the most direct threat to global markets? Japan has long been a source of low-cost financing. Rate hikes mean higher financing costs worldwide, and those who rely on yen arbitrage to buy high-yield assets will need to reassess their positions.

Ultimately, the Bank of Japan is walking a tightrope between "escaping deflation" and "avoiding excessive tightening." Once wage growth and inflation form a positive feedback loop, gradual rate hikes will become the new normal. Investors should keep a close eye on three signals: progress in wage negotiations, inflation trends, and the central bank’s attitude adjustment toward yield curve control policies.