The hottest topic in the financial world these past two days isn’t the pace of Fed rate cuts, nor is it the crypto market trend—instead, it’s whether the Bank of Japan will raise interest rates.

You might wonder: with Japan’s economy, how much of a stir could a rate hike really cause? But this time, it’s not a minor issue. This is a rare shift in monetary policy not seen in thirty years, and it could even reshape the logic of global asset pricing. Gold, in particular, is very likely to become the biggest winner in this upheaval.

**Why is it Japan that’s bucking the trend?**

While the rest of the world is considering easing and rate cuts, Japan is moving in the opposite direction. There are three major problems behind this that can’t be ignored:

**Inflation is completely out of control**
Core CPI has exceeded the 2% warning line for eight consecutive months. Remember, Japan has been plagued by deflation for decades, and even the epic quantitative easing during Abe’s era couldn’t really drive up prices. Now that he’s gone, inflation has arrived—a classic case of a retaliatory rebound after long-term suppression.

**Yen depreciation is out of hand**
In two years, the yen has fallen from 110 to 160, a drop of over 45%. This isn’t just volatility—it’s a free-fall collapse. Japan relies heavily on resource imports, so when the currency weakens, everything gets more expensive. Relying on forex intervention clearly isn’t sustainable; a rate hike has become the last resort to stabilize the exchange rate.

**Rising wages are pushing up cost pressures**
Unions are demanding a 5% wage increase, and companies have no choice but to go along. After all, inflation is eroding the yen’s purchasing power so quickly that they can’t retain employees without raising wages. This further fuels the inflation spiral—a classic vicious cycle.

So this rate hike isn’t a proactive move, but an act of self-rescue after being backed into a corner. As for why gold stands to benefit, we’ll discuss that in detail next.