Behind the Yen Rate Hike Turmoil: The Deliberate Regulation of Global Liquidity

What Is the Market Panicking About?

In recent trading days, the market has been filled with fears of a Japanese rate hike. Many investors firmly believe that once the Bank of Japan raises interest rates, it will trigger a chain reaction of global asset price collapses—simply because: over the past decade, the yen has served as the primary funding currency for global carry trades, continuously providing liquidity to worldwide capital markets. If this “water tap” suddenly closes, the consequences could be dire.

This logic appears to be sound on the surface. Japan has long maintained ultra-low interest rates, leading companies and investors to finance themselves in Japan at extremely low costs (around 0.5%) and then invest these cheap yen into high-yield assets—such as US bonds, US stocks, tech stocks, etc., with annual yields above 4%. This carry trade is massive, involving estimated trillions of dollars. If it reverses, it could indeed impact global markets.

In mid-December, after the Bank of Japan signaled a modest rate hike, the market immediately reacted: BTC dropped from $93,000 to $85,000, sparking panic. But it’s worth noting that this panic only lasted a day and then subsided, which in itself reveals the core issue.

The Core Question: Who Is Driving This Rate Hike?

On the surface, it looks like the Bank of Japan is proactively raising rates, but the real driving force is elsewhere. This rate hike is primarily led by the U.S. Treasury, not a voluntary decision by the Japanese government.

Japan’s economic policy foundation is Abe Economics, centered on low interest rates and stimulus. The decision-makers, led by Bank of Japan Governor Ueda Kazuo, do not advocate aggressive rate hikes. It is the pressure from the U.S. Treasury and the need to manage global liquidity that prompted the BOJ to take this step.

This is a crucial detail: it’s not Japan’s unilateral decision, but a coordinated move in global monetary policy led by the U.S.

The Deeper Logic of Liquidity Management

The Federal Reserve began balance sheet expansion on December 1, releasing liquidity. Meanwhile, the yen has been tightening liquidity supply. These seemingly contradictory actions are actually part of a sophisticated “see-saw” liquidity mechanism.

From 2022 to 2024, the Fed is in a rate-hiking cycle, while Japan maintains low rates, providing continuous global liquidity. During this period, US stocks have continued to rise strongly, supported by yen carry trades.

From 2025 to 2028, the Fed will enter a liquidity easing cycle, while Japan will need to moderately tighten liquidity to maintain exchange rate stability. This is a planned liquidity management strategy aimed at preventing systemic risks from excessive asset inflation in a loose environment.

In short, the yen’s rate hike is not an out-of-control black swan event but a result of coordinated actions among global central banks.

What Will Happen Next?

It is expected that in 2026, Japan will continue to adopt a moderate rate hike stance (rhetorically firm but with gentle actions), while the Fed will maintain a cautious pace of rate cuts (committing to easing but not too quickly). This “easing-tightening” rhythm can precisely manage global capital market expectations, keeping them steadily rising without overheating and creating bubbles.

Current Data Observations

Currently, BTC is around $85,630, with a 24-hour change of -0.44%; ETH performs slightly better, at $2,830, up 0.42%. This divergence reflects a rational market correction—after short-term panic subsides, investors are re-evaluating fundamentals and long-term logic.

Final Warning

Many are driven by panic to hurriedly sell assets, but they often don’t realize that this is the most dangerous moment. When the market roars and rains, those who rush to exit will find they can’t buy back in later. The tightening of global liquidity is orderly and controllable, far less severe than initially feared. True opportunities often emerge when others are in panic.