Market expectations for a Bank of Japan interest rate hike are being significantly brought forward. On February 19, Bloomberg reported that Junichi Hanzawa, chairman of the Japanese Bankers Association, stated during a regular press conference in Tokyo that the central bank could initiate a rate hike as early as March or April, with the specific pace depending on the evolution of economic and price conditions. This statement further reinforces the market's hawkish outlook. According to the latest Reuters survey, a majority of economists now expect the Bank of Japan to raise its policy rate to 1% by the end of June. This timeline is notably earlier than predictions made before the ruling party's significant victory in the lower house election, with the consensus for the next hike shifting from September to the first half of the year. In December of last year, the BOJ had already raised the rate to 0.75%, the highest level in 30 years, and explicitly stated its readiness to continue the rate hike process. A recent Morgan Stanley survey of U.S. investors corroborates this hawkish shift. Some investors have begun pricing in the possibility of a rate hike being moved up further to April, with some not ruling out action at the March meeting. Analysts point out that the joint U.S.-Japan foreign exchange check conducted in January, along with a scheduled meeting in March, could create external policy coordination pressure, potentially prompting the BOJ to act in March. Despite lingering market disagreement over the exact timing of the hike, the January meeting minutes revealed that internal differences are narrowing. While some policy board members supported a rate hike, they also noted that, aside from food and dining-out costs, the pass-through of labor costs to core CPI remains constrained by insufficient household consumption power, and subsequent inflation trends still require data verification. It is noteworthy that the release timing of key inflation data significantly lags behind the policy meetings: nationwide CPI and Tokyo CPI for April will be released on May 22 and May 1, respectively. This means the central bank's April meeting will make decisions without this core data. In this context, Morgan Stanley advises investors to pay attention to implied signals from supplementary indicators such as the Tankan survey and branch manager meetings. Simultaneously, the market remains highly sensitive to recent statements from BOJ officials. Speeches by Deputy Governors Himino (March 2) and Koeda (February 24) will be crucial windows into policy direction and may provide key guidance for market expectations during this data vacuum. Meanwhile, markets are closely watching whether Prime Minister Takaichi Sanae will reiterate calls for the BOJ to maintain low interest rates, as her policy stance could exert potential pressure on monetary authorities. Analysts believe that political willingness to influence the interest rate trajectory could become an external variable affecting the central bank's decision-making pace. Investors are forming a new cognitive framework regarding the fiscal stance of the Takaichi administration. A recent Morgan Stanley survey indicates that, although uncertainty remains regarding the specific framework and timing of a consumption tax cut—including whether it will be a temporary two-year measure—the market narrative has shifted noticeably. It is moving away from concerns about excessive fiscal expansion towards assessing how fiscal easing will be selectively advanced. This judgment aligns with Morgan Stanley's view of Japan's robust fiscal fundamentals. However, given the significant holdings of overseas investors in the ultra-long-term Japanese government bond market, market focus on fiscal sustainability will not diminish. The immediate focus will be on the latest developments from the National Commission on Consumption Tax Reduction. Markets are closely evaluating the commission's discussion direction and its potential impact on the fiscal management framework, while cautiously assessing the practical feasibility of related policies. Against the backdrop of a consolidated political base for the ruling party, market attention on Japan's economic upside is expanding beyond pure inflation-fighting logic to encompass security and strategic investment areas. The Morgan Stanley survey shows that, beyond price trends, investors have strong interest in the industrial impact of national security-related policies. There is a widespread expectation that security-related fiscal budgets will continue to expand, with focus concentrated on two main areas: first, crisis management and strategic investment, covering economic security, food, energy, resources, healthcare, and national resilience; second, 17 key strategic sectors, including artificial intelligence, semiconductors, shipbuilding, and aerospace. Notably, regarding the previously proposed $550 billion investment plan for the U.S., some investors expect specific project details to be gradually disclosed after the March U.S.-Japan meeting. Additionally, market attention is heating up regarding the recently discussed defense spending target, with particular focus on the details of fund usage for non-core defense expenditure items, such as infrastructure.