The Bank of Japan's policy meeting next week is becoming a focal point for financial markets. According to multiple informed sources, the BOJ may commit to continuing the rate hike process during the meeting, a expectation that has been brewing since around December 12.

Let's start with the basics. The market has already digested the BOJ's decision to raise interest rates from 0.5% to 0.75% in December. Investors were not too surprised at the time, as Governor Ueda hinted at this rate hike plan several months in advance. But now, the question becomes more interesting—what level will the BOJ push its policy rate to?

According to sources, the central bank's stance is "prudent but flexible." While they pledge to continue raising rates, the pace of hikes will depend on the actual economic response to each adjustment. In other words, the BOJ plans to take a wait-and-see approach, deciding the next steps based on market and economic data. This gradual approach allows the bank to raise rates without causing excessive shocks to the economy.

Interestingly, the BOJ may update its estimates of the policy-neutral interest rate internally. However, since precise forecasts are inherently difficult, the bank does not intend to use this figure as the main communication tool with the market. This reflects a pragmatic attitude—acknowledging uncertainty rather than trying to provide a seemingly precise but easily overturned commitment.

So, how will the pace of future rate hikes be determined? Sources reveal that the key decision factor will be observing the impact of rate increases on bank lending, corporate financing, and overall economic activity. Japan's current real interest rates remain relatively low, providing the BOJ ample room to gradually push up nominal rates. Several insiders believe this direction is already largely set, and the rate hike process is unlikely to reverse, with differences only in speed and magnitude.

For the crypto market and broader asset allocation, these developments are worth paying attention to. Rate hikes by the central bank often influence liquidity conditions and the attractiveness of risk assets. As yields on traditional financial assets rise, investors' demand for high-risk assets may adjust accordingly. Therefore, every move by the BOJ could potentially cause market sentiment to fluctuate.