Tomorrow a major event is about to happen. The market has essentially locked in expectations that the Bank of Japan will raise its policy interest rate on December 19th from 0.50% to 0.75%.

This sounds like a normal interest rate adjustment, but it’s not that simple. This will be the highest level since 1995, marking the official end of a prolonged ultra-low interest rate environment that has lasted about thirty years. For the global financial markets, this is a major turning point.

**Why is Japan taking action now?**

On the surface, there are two parallel reasons: first, domestic prices continue to rise, import costs are climbing, and the central bank is forced to act; second, the yen has been weak for a long time, and raising interest rates can help stabilize the currency and attract capital inflows. These two factors have driven the policy shift.

**How will global funds move?**

The key term is "yen arbitrage trading." Over the years, many international investors have borrowed low-interest yen and then invested in high-yield assets like U.S. bonds. Once Japan raises rates, this arbitrage space shrinks, and some funds will inevitably flow back. Liquidity will fluctuate accordingly, potentially impacting bond and stock markets.

However, the market has already priced in this expectation for several months, so the actual impact may not be that significant. But in the short term, the global liquidity landscape will indeed change.

**What is the crypto market watching?**

From this perspective, central bank policies around the world are diverging, and the tide of global liquidity is becoming more complex. The logic of capital allocation across different markets will also adjust accordingly. As an alternative asset, cryptocurrencies may face new opportunities or pressures amid these macroeconomic changes. Monitoring central bank actions is essentially tracking the flow of funds.