This Wednesday, the Bank of Japan will convene a new monetary policy meeting, where Governor Haruhiko Kuroda is expected to present detailed quantitative tightening policies (QT) to respond to the Ministry of Finance's request for the bank to "gradually reduce the scale of bond purchases."

In March of this year, the Bank of Japan ended its large-scale monetary easing program that had lasted for more than a decade, announcing a reduction in bond purchases, marking a turning point in the bank's liquidity policy after inflation stabilized.

The market consensus is that starting next month, the Bank of Japan is expected to cut its bond purchase scale, initially estimated to be reduced from the current 6 trillion yen per month to 5 trillion yen per month, and to 3 trillion yen per month within two years. Insiders say the Bank of Japan has no intention of surprising the market, indicating that their actual operations will be close to market expectations.

In addition to reducing bond purchases, there are also many people betting that the Bank of Japan will continue to raise interest rates at this meeting. Early Monday morning, related swap market pricing showed that the possibility of the Bank of Japan raising interest rates by 15 basis points before the end of the month is about 50%, up from 25% a week ago.

Insiders say that due to inflation rates being roughly in line with expectations, some officials are still open to the option of raising interest rates. However, some officials hope to wait for more data to seek more signs of consumer recovery.

All this suggests that the discussion at this meeting will be exceptionally intense. In this situation, Governor Haruhiko Kuroda's role will be very important, as he may formulate policy guidelines according to his own will. Under global attention, this meeting will cause a response in the global market, and the yen exchange rate may fluctuate, either continuing this month's significant rebound or falling back to a multi-decade low.

Last week, the yen rose sharply, driving the renminbi higher, while hitting the Japanese stock market and gold, causing investors to reassess their positions. After reaching 161.95 points on July 3, around 10:30 a.m. Monday, the US dollar against the yen came close to 153.57 again.

Mizuho Bank's Chief Market Economist Daisuke Karakama believes that the short-term appreciation of the yen makes it a good time to raise interest rates, as the Bank of Japan can say that the rate hike is unrelated to the foreign exchange rate. He continued to say that this meeting is likely to raise interest rates, which is still relatively easy now. Otherwise, they may take action again under the pressure of a weak yen. Therefore, this may be a key moment for the yen to break away from a significant trend of depreciation.

Former Bank of Japan official and current Chief Economist at Okayama Securities, Ko Nakayama, said that this is a difficult decision for the Bank of Japan. He analyzed that raising interest rates will make the Bank of Japan clearly express a strong desire for policy normalization, but the authorities will take action without being in a hurry.

It is worth noting that since mid-June, Haruhiko Kuroda has not publicly discussed monetary policy, which is the longest period of silence he has maintained before a policy meeting. This vacuum state makes it more difficult for the market to predict the possible outcomes of the meeting. However, on June 18, he admitted in a speech to the Diet that, based on data and information on the economy, inflation, and financial conditions, it is very likely that the policy interest rate will be raised.