Zhong Xiaoyang, co-manager of the PruLife Multi-Income Bond Strategy Fund, stated that if there are no major negative news related to tariffs, the Bank of Japan is likely to raise interest rates at this week's meeting. With wages and inflation continuing to be high, and the domestic demand outlook for 2025 improving, the Bank of Japan is likely to increase interest rates. PruLife expects this to be the first rate hike in 2025, with gradual increases thereafter, and the policy rate is expected to rise to 1% by the end of the year. The policy rate may even exceed 1% as it approaches the lower range of the Bank of Japan's neutral interest rate. Looking ahead, PruLife pointed out that the Bank of Japan may consider balance sheet reduction after the June meeting and reconsider its bond purchasing program. Despite hedging currency risks, Japanese government bonds are more attractive compared to other sovereign bonds. However, due to the Bank of Japan's policy direction opposite to other central banks, Japanese government bonds may not perform as well as other sovereign bonds. As the Bank of Japan gradually increases interest rates to more restrictive levels, the yield spread between short-term and long-term Japanese government bonds may narrow, although the change will be relatively slow. Meanwhile, due to concerns about excessive government spending, investors holding longer-term government bonds may demand higher premiums. Furthermore, the movement of the Japanese yen is mainly influenced by the difference in interest rates with the United States. Currently, the yield on US Treasury bonds is a major external factor. Given that the significant adjustment in the US Treasury market reflects the inflation pressure brought by tariffs and superior US growth compared to other economies, the likelihood of a sharp depreciation of the yen in the short term is low. PruLife predicts that the yen will enter a consolidation phase, with a chance for appreciation if the Bank of Japan signals a possibility of rate hikes. PruLife continued by pointing out that Japanese officials have mentioned that the volatility of the yen is quite high, but the possibility of large-scale intervention in the foreign exchange market is low. As US inflation may rise later this quarter, coupled with continued economic growth, the market may further adjust its expectations for rate cuts this year, putting upward pressure on yields and pushing the US dollar against the yen. Investors should also be aware that trade policies may undergo significant changes, and the Federal Reserve may delay its pace of rate cuts, making the two-way risks of economic growth in 2025 more significant compared to 2024. Therefore, PruLife expects the actual volatility of the USD/JPY exchange rate to remain high in 2025.