The Bank of Japan will hold a monetary policy meeting next week (December 18-19), and the market widely expects the policy interest rate to be raised from the current 0.5% to 0.75%, which will be the highest level in the past 30 years. At first glance, it may seem like nothing major, but the impact on the global financial markets—especially the crypto sector—could be much bigger than you think.

First, let's talk about the yen carry trade. Over the years, global investors have borrowed yen to invest around the world, reaching a scale of trillions of dollars. Once Japan raises interest rates, the cost of borrowing yen will rise sharply, forcing many previously low-interest-rate positions to be liquidated. At that point, large-scale capital will flow back into Japan, potentially crashing the stock market, bond market, commodities, and even crypto assets. High-valuation risk assets will be hit hardest, and volatility will significantly increase.

Looking at the exchange rate from another angle, the yen's appreciation is almost certain, and the USD/JPY will weaken. This may sound insignificant, but it actually has a profound impact on commodity pricing. A weaker dollar supports higher prices, but on the other hand, global economic outlooks are not very optimistic, and demand concerns may suppress gains. Other currency pairs against the yen will also fluctuate accordingly, disrupting international trade and capital flows.

The deeper issue lies in global interest rates. Japan, as a major global creditor nation, has government bond yields that serve as an important reference for international risk-free rates. If Japan raises interest rates, global risk-free rates will be pushed higher, increasing borrowing costs for companies and governments, indirectly depressing stock valuations, especially hurting growth-oriented companies the most.

Emerging markets are the most vulnerable. Countries heavily reliant on foreign capital inflows now face the risk of capital outflows, leading to currency depreciation, increased debt repayment pressures, and economic stability at risk.

In the coming period, markets will continue to digest this news, and cryptocurrency prices may experience significant volatility before Friday. But volatility also presents opportunities—don't panic or follow the herd. Identify projects you believe in and buy on dips; when others are afraid, it's the perfect time to take action.