The Bank of Japan's Announcement No. 19 is about to release its interest rate decision, and the market generally expects a rate hike this time. This is a significant blow to recent risk assets, which was already reflected in the market last night, as some pressure was priced in advance. Plus, the US CPI data will be released tonight at 9:30, making the upcoming market rhythm quite tight.

Let's break down the transmission mechanisms of these two events:

**Chain Reaction of the Bank of Japan's Rate Hike**

Recently, many institutions have been playing an arbitrage game—using low-cost yen loans to exchange for dollars, then buying other high-yield assets. What does a rate hike mean? The cost of borrowing increases, and the yen will appreciate accordingly. This arbitrage becomes unprofitable. Many institutions will be forced to close positions, selling other assets to buy yen to repay debts. The impact of capital outflows will be quite direct.

**Dual Impact of CPI Data**

Lower data indicates less inflationary pressure, increasing the probability of the Federal Reserve cutting interest rates in January, which weakens the dollar and boosts expectations of depreciation. Funds will seek other higher-yield investments. Conversely, higher CPI means the Fed may delay rate cuts, increasing the attractiveness of the dollar, and funds may withdraw from other assets to buy dollars.

If I had to suggest a trading approach: short on rallies.