Recently, many traders have been discussing the same question: Japan only slightly adjusted its interest rate policy, so why did it trigger such a dramatic reaction in the global markets?

To be honest, this matter isn't directly related to national strength. Japan didn't become stronger because of it. But the issue is that this move directly rewrote the logic of global capital flows.

To understand this, we need to look at Japan's past approach. For over twenty years, the Bank of Japan has kept interest rates close to zero, even implementing negative interest rates at times. This doesn't mean ordinary people borrow money without paying interest; the key is that large financial institutions and international capital can borrow vast amounts of yen at nearly free costs.

With these almost free yen, clever players operate simply: borrow yen → exchange for USD → buy globally. Bitcoin, gold, US stocks—anything that can appreciate in value is fair game.

The core logic of this game is clear: as long as the assets you buy are rising in value, and the cost of borrowing is near zero, this cycle can continue endlessly, growing larger and larger. Industry estimates suggest that the total scale of such arbitrage funds has approached $4 trillion.

You can think of the yen as a master switch in the global financial system.

Now, Japan is starting to shift—either directly raising interest rates or signaling a rate hike—resulting in the yen potentially appreciating. For institutions that borrowed yen, the pressure to repay suddenly increases—the yen they owe becomes more valuable.

Market reactions will be very direct: sell off Bitcoin, gold, US stocks, and convert everything into yen to settle accounts first. If you see those assets falling simultaneously, it's not because they are inherently problematic; rather, the collective funds that once boosted them are now being rapidly withdrawn.

The reason the market is so tense now ultimately comes down to Japan itself being caught in a dilemma. On one hand, the continuous depreciation of the yen means imported goods are becoming more expensive, straining domestic consumers; on the other hand, Japan's debt scale is enormous, and raising interest rates would make servicing that debt increasingly difficult.

So, choosing what to do is difficult: no rate hike means increased domestic pressure; raising rates could cause global market turbulence. What truly makes everyone break out in cold sweat isn't just how Japan's economy will fare, but how many assets will be hammered down if that $4 trillion of cheap funds collectively turns around and flows back.

Ultimately, whether Japan raises rates or stays put isn't just Japan's decision. It's about whether the ongoing "cheap yen liquidity" that has lasted over twenty years can continue to flow. If the tap is truly turned off, the assets that have been inflated the most will be the first to collapse.