The Bank of Japan's interest rate hike this time has indeed caused quite a stir. However, there is no need to panic excessively; we should still keep a close eye on the areas that require vigilance.

Let’s first talk about the underlying logic—Japan has long played the role of the global "cheap money faucet." The ¥5 trillion yen arbitrage market (accounting for one-fifth of global forex trading) operates by borrowing zero-interest yen to invest elsewhere and profit from the price difference. Now, the expectation of interest rate hikes has surged from 30% to 80% within two weeks, and the monetary policy meeting on December 19 is basically a done deal. The result is a triggering of a chain of liquidations: selling assets and repaying yen, with the Nikkei 225 index dropping by 1.89% on that day, the two-year Japanese bond yield breaking 1% to reach a new high since 2008, and the ten-year yield skyrocketing to 1.879%, while the yen to dollar exchange rate surged to 155.4.

Even more bizarre is that the Japanese government is now engaging in a double-edged strategy: on one hand, it is raising interest rates to stabilize the exchange rate and curb inflation (the core CPI has exceeded 2% for 50 consecutive months), while on the other hand, it plans to issue 63 trillion yen in government bonds to sustain the 21.3 trillion yen economic stimulus plan. The problem is that Japan's debt ratio has already piled up to 229.6%, and raising interest rates directly increases the government's debt repayment costs; this operation is truly like dancing on the edge of a knife.

How will the global market be affected? It's unlikely to crash, but the impact points are very clear: the US stock technology sector, US Treasury bonds (Japan holds $1.2 trillion), and those emerging markets supported by yen arbitrage funds (for example, 32% of Vietnam's stock market foreign investment comes from this strategy) need to stay alert. That said, the arbitrage trades have already been closed out by 50%-60%, and some risks have actually been released in advance.