A lot of people still haven’t realized what’s happening with yen interest rates.

Now the market is rebounding, and everyone’s talking about buying the dip. But if you do the math—the real interest rate in Japan has already reached upwards of 1%, which is higher than the yield on quite a few assets.

The old playbook was simple: borrowing yen was almost free, then you’d turn around and buy US Treasuries or BTC, and pocket the interest spread. That was the golden era.

But now? Interest rates keep climbing, and the arbitrage window is getting squeezed thinner and thinner. If yen rates really shoot past 2%, a lot of asset returns won’t even cover borrowing costs. What happens then? Massive liquidations and sell-offs—you tell me who’ll be able to withstand that.

Institutions are still willing to enter and build positions, betting that the Fed will keep cutting rates and pumping liquidity. But don’t forget: if the Fed fails to give a clear signal of consecutive rate cuts at the December meeting, that sword hanging over our heads could drop at any moment.

Right now, the market is purely propped up by sentiment. And sentiment is fickle—it comes fast and goes even faster. If the arbitrage chain breaks, you won’t even have time to get out.

At this stage, don’t just focus on short-term ups and downs. The yield on Japan’s 10-year government bonds and the Fed’s policy signals—these are the real lifelines. Understanding these is a hundred times better than chasing rallies or panic selling.