After the Bank of Japan's interest rate hike, the foreign exchange market reacted differently, and regulatory authorities in various countries are closely monitoring the policy coordination effects.

December 22nd, the financial markets迎来 an important turning point. The Bank of Japan’s announcement to raise interest rates by 25 basis points triggered a chain reaction in global financial markets. Although the risk of carry trade liquidation has been temporarily alleviated, exchange rate fluctuations and bond market yield changes have become focal points of attention.

Policy-Driven Market Reassessment

Japanese Finance Minister Shōzō Katayama expressed concerns about excessive exchange rate volatility after the G7 finance ministers’ online meeting. She mentioned that within half a day of the central bank’s rate hike, there were unilateral and sharp fluctuations. The Japanese government will take appropriate measures to respond to any abnormal volatility driven by speculators, in accordance with the September US-Japan joint statement. This statement reflects Japan’s deep concern over the USD/JPY breaking through the 158 level.

Katayama emphasized that the central bank’s rate hike decision is based on wage and price trends, aiming to achieve the 2% inflation target in a sustainable and stable manner. The government will continue to work closely with the Bank of Japan to ensure monetary policy aligns with wage growth.

Bond Market Volatility and Rising Global Financing Costs

The Bank of Japan’s rate hike pushed the 10-year government bond yield above 2%, reaching a high not seen since 1999, with profound impacts on global macro hedge funds. The yen, once a funding currency, has significantly decreased in “cost-effectiveness,” reducing the attractiveness of high-leverage strategies.

Meanwhile, the US 10-year Treasury yield rose by 3 basis points to 4.15%, and the 2-year Treasury yield increased by 3.2 basis points to 3.492%. France faces a breakdown in budget negotiations, with the 30-year government bond yield rising to 4.525%, the highest since 2009. This indicates widespread upward pressure on global bond yields.

The Fed’s recent Reserve Management Purchase(RMPs) program has produced market effects similar to quantitative easing(QE). The market is beginning to consider whether the BOJ’s monetary policy adjustments will ultimately prompt the Fed to cut rates more quickly, which will be a key focus in the future.

US Stock Market Rebound, Tech Stocks Lead

In an environment of renewed risk appetite, the three major US stock indices generally rose. Last Friday, as the “Quadruple Witching Day,” the total value of expiring contracts reached $7.1 trillion, with active market trading volume. The Dow rose 0.38%, the S&P 500 increased 0.88%, the Nasdaq gained 1.31%, and the China Golden Dragon Index rebounded 0.86%.

In European markets, the FTSE 100 rose 0.61%, France’s CAC 40 increased 0.01%, and Germany’s DAX 30 gained 0.37%. Tech giants performed notably, with Micron’s Q1 earnings report strong, boosting market sentiment. Oracle rose 6.6%, Nvidia and Broadcom increased by 3.9% and 3.2%, respectively. In contrast, Nike’s China business underperformed, dragging the stock down 10.5%.

Commodity Market Movements: Silver Hits Record High

Driven by investment demand and supply tightness, silver prices soared to a record high, breaking through $67.0 per ounce. Gold closed for the second consecutive day with a doji star, up 0.14%, at $4,338.6 per ounce. WTI crude oil rose 1.14% to $56.5 per barrel. The VIX fear index fell 11.57%, reflecting a significant improvement in market risk appetite.

USD/JPY rose 1.39%, approaching 158.0, while the US dollar index increased 0.3% to 98.7. EUR/USD declined 0.12%.

In cryptocurrencies, Bitcoin fell 0.34% in 24 hours, trading at $87,670. Ethereum declined 0.79% in 24 hours, at $2,940. The Hang Seng Index futures closed at 25,843 points, up 118 points, 152 points higher than yesterday’s close.

Fed Officials’ Cautious Attitudes

Federal Reserve Bank of New York President Williams stated that there is no urgency to further adjust interest rates at present, as recent employment and inflation data have almost not changed his expectations. He believes that the rate cuts already implemented have put policy in a good position, and he hopes inflation will fall back to 2% without unnecessarily damaging the labor market.

Cleveland Fed President Mester opposed recent rate cuts, expressing more concern about rising inflation than a fragile labor market. She stated that, at least until spring, the Fed does not need to adjust the current target range of 3.5% to 3.75%. She emphasized that clearer evidence of inflation returning to target or significant labor market weakness would be necessary to justify a rate adjustment.

Forecasts released after last week’s meeting show the Fed expects only one rate cut next year. Williams noted that the US inflation rate in November slowed to its lowest in four years, but some “technical factors” may have distorted the report, involving issues with data collection in early October and November. Consumer confidence, as measured by the University of Michigan’s December final consumer sentiment index, rose 1.9 points to 52.9, below the median expectation of 53.5. Consumers’ views on current conditions for purchasing big-ticket items worsened to a historic low.

Space Exploration Focus Shift

US President Trump confirmed that he hopes to send astronauts back to the Moon as soon as possible, aiming for lunar landing in 2028, followed by establishing a lunar base, with the ultimate Mars mission temporarily on hold. Trump issued a comprehensive executive order, aiming for the US to send humans back to the Moon before 2028 and to establish a permanent lunar outpost by 2030. The order confirms plans to deploy nuclear reactors on the Moon and in orbit, and includes language to protect space from weapon threats. The US is eager to surpass China, which plans to send astronauts to the Moon and establish a base by 2030.

Hours before signing the space order, billionaire and private astronaut Elon Musk was sworn in as NASA’s 15th Administrator. According to NASA’s Artemis program launched during Trump’s first term, Trump hopes to send Americans to the Moon again.

Tech Regulation and Corporate Developments

US House Republicans are calling for similar congressional oversight of AI chip exports as military sales. House Foreign Affairs Committee Chairman Mastro proposed the “Artificial Intelligence Regulation Act” on Friday, requiring notification to Congress for AI chip sales to adversarial countries. Any processor with performance equal to or higher than Nvidia’s H200 will be subject to regulation. According to a report by the Center for Strategic and International Studies, H200’s performance is about six times that of H20, which is the most powerful chip currently allowed for direct purchase by China under US regulations.

TikTok’s parent company ByteDance is projected to achieve approximately $50 billion in profit in 2025, a new record. The company’s net profit in the first three quarters of this year totaled about $40 billion, exceeding internal expectations. If achieved, ByteDance’s profit will approach the level of US competitor Meta’s estimated $60 billion this year. An internal memo indicates ByteDance has signed binding agreements to spin off TikTok’s US operations, establishing a joint venture with US investors including Oracle Holdings to ensure platform operation and reduce Chinese control. Chinese regulators have yet to comment on whether they will approve the deal.