According to Allianz Investment, the Bank of Japan is expected to announce a reduction in bond purchases and an interest rate increase at its meeting in July. The Bank of Japan will establish a path for reducing bond purchases, adjusting the scale of purchases according to market expectations to avoid chaos. Due to long-term structural factors in Japan, coupled with support from global growth, Allianz Investment continues to be optimistic about Japanese stocks. Allianz Investment points out that due to limited guidance from the Bank of Japan, there is significant uncertainty regarding potential interest rate hikes. However, recent data has been solid enough for the Bank of Japan to seize the opportunity to exit zero interest rates before external conditions change. It is expected that the Bank of Japan will raise the interest rate ceiling to around 0.25%. Given the current inflation level and significantly negative real interest rates, the market should be able to fully digest this interest rate hike. Although the market is concerned that rising interest rates may have a negative impact on consumption, stabilizing the yen and preventing further depreciation of the yen is crucial for stabilizing consumption and market sentiment. However, whether the yen can appreciate significantly still faces challenges before more evidence reflects a slowdown in the US economy. Allianz Investment expects the Bank of Japan to reduce bond purchases by a considerable amount, possibly reducing purchases by 3 to 4 trillion yen per month over the next two years to encourage buyers to reinvest in the market. Furthermore, Allianz Investment maintains a cautious view on Japanese government bonds and believes that current prices largely reflect upcoming changes, therefore, there may be a short-term adjustment of positions in Japanese government bonds to neutral.