December 19, 2025, 11:00 AM Beijing Time. The focus of global traders is on one place—the Bank of Japan's decision.

A 25 basis point rate hike is on the table, and the figure 0.75% looks quite ordinary. But what does this mean for the global financial markets? It signals that the ultra-loose monetary policy that has lasted for thirty years may finally be coming to an end. This sword hanging over risk assets is finally about to fall.

But the subsequent market performance directly defied everyone's expectations.

The rate hike was implemented, yet the yen actually depreciated. After a brief震荡, risk assets surprisingly started to rebound. What is going on? The market is telling everyone in the most counterintuitive way: the real fear is not the known facts, but the unknown variables. When uncertainty dissipates and the Bank of Japan also states that "monetary environment remains accommodative," it instead signals a "bullish" outlook. Risk assets rebounding on this basis is understandable.

The question is, does this really mean the risk has been alleviated?

Don’t overthink it. Bank of Japan Governor Ueda Kazuo has made it clear—if the economy and prices continue to improve, the policy rate will be raised again. The "source" of cheap global funds is tightening more and more.

What is the key word here? Yen arbitrage trading. For decades, the game has been simple: borrow money in yen at near-zero cost, then deploy that money into various high-risk areas around the world—stocks, bonds, and cryptocurrencies. The foundation of this arbitrage is that the yen is so cheap it’s almost free.

And now? This foundation is collapsing. The era of cheap yen is coming to an end, and the tide of cheap capital is receding. When that happens, who is left exposed will be clear as day.

The new era of capital game has already begun.