There are overwhelming rumors about the imminent rate hike by the Bank of Japan, and many are worried that this could trigger severe fluctuations in the global financial markets. However, in reality, these concerns might be exaggerated.

First, it is necessary to clarify a fundamental concept. Japan's interest rate environment is no longer simply zero interest rate. Zero interest rate only refers to the central bank’s lending cost to commercial banks; lending rates for commercial institutions have always existed. This is key to understanding the subsequent logic.

In just over ten days, the Bank of Japan will hold a monetary policy meeting, and the market expects a possible 0.5 percentage point increase. Why is this event being portrayed as so serious? Because the yen, as an international reserve currency, has high liquidity, and global institutions can easily access low-cost yen funding from Japan. A simple numerical comparison: the yield on US dollar time deposits is about 5%, while borrowing yen from Japan costs only around 2-3%, which is almost risk-free arbitrage. Many large institutions borrow yen and then either convert it into dollars for deposit or use it to invest in other assets.

If the yen's interest rate rises, the attractiveness of this arbitrage will be greatly reduced, and some funds may flow back into Japan, potentially withdrawing from other markets, which could impact certain asset prices.

But here is a key turning point: the BOJ’s rate hike will be quite restrained, and the market has already fully digested this expectation. Events that are well anticipated usually do not cause unexpected large shocks. This is also why the industry generally believes that a so-called "big震" will not occur.

From a deeper perspective, the reason the yen can support Japan’s long-term easing policy without collapsing is because the yen has already been internationalized. The yen is no longer used only by Japanese people but has become an important part of the global financial system. This international status gives Japan’s monetary policy a unique space.