The Bank of Japan, which has given up on achieving its 2 percent inflation goal by printing more money, is expected to fret over the fate of the "Trump rally" in 2017.
If U.S. Treasury yields continue to rise and the dollar extends gains against the yen, the BOJ might begin tapering its aggressive monetary easing. But once the yen turns upward, the central bank could be forced to implement additional easing once again, just like it's done for the past several years.
"The BOJ wants to carefully assess sustainability of the rise in U.S. interest rates and the yen's weakening trend since the U.S. presidential election," said Naohiko Baba, chief economist at Goldman Sachs Japan Co.