The Bank of Japan faces a dilemma. The continuous weakening of the yen is forcing it to consider more aggressive interest rate hikes, with industry rumors suggesting the central bank is planning up to three rapid rate increases. Once the yen depreciates past the critical level of 160, authorities may be compelled to take unexpected and forceful measures.

What chain reactions could this trigger?

**The most direct impact on the yen**—Rapid rate hikes can significantly narrow the interest rate differential between Japan and the US, attracting capital back into Japan and substantially supporting the yen's exchange rate. This is precisely the effect policymakers aim for.

**The Japanese stock market may come under pressure**. Profits of export-oriented companies could be eroded by the yen's appreciation, and the Nikkei 225 index, which is mainly composed of exporters, might face challenges. Meanwhile, the decades-long ultra-low interest rate environment is about to be broken, leading to higher corporate financing costs, and impacting real estate and banking stocks.

**The global economic landscape could change**. As the world's largest creditor nation, an interest rate hike in Japan could mean a large amount of capital withdrawing from overseas markets and flowing back home. Yen appreciation could also have chain reactions affecting the exchange rate ecosystem of other major currencies.

This logic essentially functions as a "critical point trigger mechanism"—the central bank may not necessarily need to raise rates three times in a row, but once the yen falls into a dangerous zone, they will be forced to respond with far more aggressive measures than current market expectations. This policy shift's impact on global financial markets warrants close attention.