Recently, there has been quite a stir in Japan, with inflation suddenly soaring by 100 basis points, reaching a modern high. The bond market reacted the fastest, with yields skyrocketing to 2.1%. However, the Central Bank's response was even more aggressive—selling off $500 billion worth of US stocks to stem the bleeding.

You think about it, this operation seems to stabilize the local economy, but in reality, it has thrown a liquidity bomb in the global market. As Japan’s bond yields rise, the cost of global funds will follow suit; coupled with the Central Bank's round of $500 billion sell-off, the liquidity in the market is gushing out like a burst pipe. For high-volatility assets like Bitcoin and Ethereum, this double whammy won’t feel good.

What will the subsequent chain reaction look like? The US dollar may continue to tighten, and the short-term pressure on US stocks is increasing dramatically. Most risk-averse funds will likely flow into traditional safe havens like gold and US Treasuries. As for the crypto space, it is hard not to be implicated—high-risk assets are generally facing pressure from capital outflows.

What is puzzling is whether the Bank of Japan's eagerness to act indicates that internal economic pressures are greater than they appear on the surface? On one hand, inflation is uncontrollable, and on the other, it can only rely on liquidating overseas assets to replenish funds, which indeed puts it in a rather awkward position. Looking ahead, if other central banks follow suit in a self-rescue type of sell-off, the global financial market in the first half of 2026 may enter a competitive mode of who can retreat the fastest. At that time, the market volatility is likely to reach a new level.