Recent policy developments by the Bank of Japan have attracted attention, with market focus on the impact of the US-Japan yield spread on arbitrage trading. Let's take a look at the current situation of the 2-year bonds—Japan's JP02Y at about 1%, US bonds US02Y at around 3.5%, the nominal spread is still quite large.

If the yen interest rate is raised by 25 basis points next Sunday, the Japanese bond yields may rise to around 0.75%, which could theoretically provide some support for 2-year Japanese bonds. But there's a problem: the room for narrowing the US-Japan yield spread isn't actually large. Even if Japan proceeds with the rate hike as scheduled, it will be difficult to fundamentally change the yield spread pattern between the two countries' bond markets.

From a different perspective, recent shocks to the financial markets are more about emotional fluctuations rather than substantive pressure. Traders should be wary of changes in market sentiment rather than immediate risk spikes. During this rate hike cycle, arbitrage opportunities still require observation, but there's no need for excessive reaction.