The Bank of Japan is really about to get serious! Kazuo Ueda's recent statements have completely changed market expectations.

"The inflation target is now within reach," he said at the BOJ meeting, with much firmer language than usual, clearly implying that interest rate hikes will not stop. Last week, the BOJ pushed interest rates to their highest level since 1995, and now he's hinting that if economic performance meets expectations, further tightening may follow. In other words, the next rate hike could be just around the corner.

The problem is, the yen has been performing terribly lately. It plummeted last week, and the market sensed instability. Ueda's recent comments are clearly aimed at stabilizing the currency market, and even Finance Minister Shunichi Suzuki has started warning speculators that intervention is imminent. Japan holds $1.3 trillion in foreign exchange reserves, but how long can this defense last?

More interesting is the background: Prime Minister Sanae Sato is being scorched by the cost-of-living crisis. The Liberal Democratic Party recently suffered a string of election defeats, and public anger is at an all-time high. She is pushing companies to raise wages to combat inflation, but if the yen continues to depreciate and inflation worsens, the central bank may be forced to tighten earlier than planned.

This bold gamble to end thirty years of "zero growth" has now entered a real deadlock. Will Japan's economy successfully turn around? How will exchange rate trends develop? All of these directly impact global capital flows.