The Bank of Japan announced a key decision this morning: to raise the benchmark interest rate by 25 basis points to 0.75%, the highest level since 1995. This news was already anticipated by the market, but when the actual move was made, global financial markets still felt the pressure.

Frankly, this is not just a routine interest rate adjustment but a signal of a turning point—the last remaining faucet in the world that has been continuously supplying "cheap money" is now being turned off more tightly.

Over the past thirty years, the classic game played by international capital has been: borrow Japanese yen at near-zero cost, convert to dollars, and then hunt for gold in various high-yield assets. U.S. stocks, emerging markets, cryptocurrencies... this "yen arbitrage" machine has been continuously funneling cheap funds into these highly volatile assets. It’s called arbitrage in a nice way, but in reality, it’s a global low-interest rate arbitrage frenzy.

But now the situation has changed. As Japanese interest rates climb from negative territory to 0.75%, the cost of this cheap financing is rapidly increasing. When ten-year Japanese government bonds start to become attractive and domestic Japanese assets can offer decent returns, borrowing money from Japan to invest overseas becomes less profitable. The logic of capital is very pragmatic—why take risks abroad when you can earn steady profits at home?

There is a key number to note here: Japan, as the largest foreign creditor of the United States, holds $1.18 trillion in U.S. debt. Even if only a small portion of this capital flows back to Japan, it could cause ripples in the global financial markets. The support of cheap funds behind high-volatility assets like U.S. stocks and cryptocurrencies is undergoing subtle yet profound changes.