Zhao Yaoting, global market strategist for the Asia-Pacific region (excluding Japan) at Invesco, pointed out that, as widely expected by the market, the Bank of Japan has ended its negative interest rate policy, yield curve control, and other unconventional policy tools. The Bank of Japan will set the overnight rate as its main policy rate in the future, raising it from the previously set -0.1% in 2016 to 0-0.1%. Despite this being the first rate hike since 2007, the Bank of Japan has not completely turned hawkish. The Bank of Japan still plans to maintain the purchase amount of Japanese government bonds at a similar level to ensure the market has ample liquidity and a loose financial environment. As investors had widely expected, the market reacted moderately to this decision, with the yen falling below 150 against the US dollar and the TOPIX index rising by 1.0%. Bank of Japan Deputy Governor Masayoshi Naito recently commented, "It is hard to imagine moving towards a path of sustained rapid rate hikes." The dovish comments from the Bank of Japan, along with its continued purchases of Japanese government bonds, suggest that the yen may remain weak against the US dollar, at least until the timing of the expected Fed rate cut becomes clear. Looking ahead, it is expected that the Bank of Japan will not hike rates again before the end of the year. Potential changes in the policy rate will depend on expectations for price stability. Currently, the Bank of Japan expects core consumer price index (CPI) for the next fiscal year to remain around 2%. Unlike the Fed's dot plot, the Bank of Japan does not have a publicly announced future policy rate path, but may issue more subtle guidance. Comments regarding the central bank's inflation target are worth careful consideration. With accelerating wage growth in Japan, and attractive stock valuations After facing long-term low growth and deflation challenges, the end of over a decade of ultra-loose monetary policy is a victory for the Bank of Japan. The first round of annual wage negotiations in Japan recently ended, with data showing overall wages increasing by 5.3% year-on-year, the highest wage increase since 1991. Strong wage growth makes it more likely for Japan to achieve a virtuous cycle of wages and prices, thereby maintaining 2% inflation. These dynamics are undoubtedly the reason for the Bank of Japan's rate hike. Japan's economy strengthened in the late 1980s, with the Nikkei 225 index reaching its peak in December 1989. The index finally hit a new high in February and surpassed 40,000 points earlier this month (since slightly retracing). The current question is whether the Japanese stock market can continue its strong performance. Some strong arguments suggest that the Japanese stock market can maintain its upward trend. Despite a significant rise in the Japanese stock market over the past year, valuations remain attractive compared to other major indexes. In addition, the dividend yield of Japanese stocks is higher than other major indexes. Japan's newly implemented tax-privileged investment savings plan in January, known as the Japan Individual Savings Account (NISA), is expected to be a key driver for the Japanese stock market. Cash deposits account for as much as 52.5% of household financial assets in Japan, compared to 12.5% in the US and 35.5% in the Eurozone. NISA is expected to help channel some of the cash held by Japanese households into the stock market. The Bank of Japan's decision to gradually normalize monetary policy is a positive development. This normalization can boost market confidence, and the first rate hike in seventeen years sends a strong signal that the Japanese economy no longer requires such strong support, as its own conditions have improved and are expected to continue to do so.