The Governor of the Bank of Japan, Kazuo Ueda, recently made a significant statement that inflation is gradually approaching the 2% policy target amid a spiral interaction between wages and prices. The core logic of this judgment is quite clear—the tight labor market pushes up wages, and rising wages in turn raise inflation expectations, creating a self-reinforcing cycle.

From the market reaction, this is no longer just Japan’s issue. The yen exchange rate has shown increased volatility, and carry trade positions (borrowing in yen to invest in other high-yield assets) are beginning to face unwinding pressure. Why? Because the market is re-pricing the potential future monetary policy adjustments by the Bank of Japan—if inflation truly moves steadily toward the target, interest rate normalization is not far off.

The ripple effects of this changing expectation have already propagated globally. Concerns about marginal liquidity tightening are intensifying, and risk asset valuations are under pressure, including cryptocurrencies like Bitcoin and Ethereum, amid this wave of re-pricing across major asset classes. The shift in the Bank of Japan’s stance is essentially signaling to the market that the global easing cycle may indeed be changing.