This week's most anticipated employment data has finally been released. On the surface, the data still supports the Federal Reserve's continued easing stance, but smart money has long sniffed out the underlying signals — the market isn't fully loosening up; instead, it's digesting some hidden concerns behind the data.

The fundamental issue remains inflation. Strong employment data gives the Fed the confidence to continue cutting rates, but the prerequisite is that inflation stays obediently in check. Once inflation rears its head and rebounds, the Fed will face an old dilemma: save jobs or stabilize prices? Sticky inflation is the biggest trap; once it sticks, the room for future rate cuts is directly squeezed. Therefore, every upcoming inflation report must be scrutinized carefully, while also guarding against the risk of an economic slowdown.

Another disruptor is Japan. Expectations for a rate hike in Japan in December have strengthened, and the market has already digested some of this. What truly stirred the pot was the Bank of Japan's statement that "further rate hikes may be possible in the future." The current consensus is: after this rate hike, the yen still has about 50 basis points of rate hike potential — and that's what everyone is most nervous about.

Think about it: if the yen appreciates too quickly, the US-Japan interest rate differential will start to narrow, forcing those engaged in yen arbitrage to unwind their positions. This will have a tangible impact on global liquidity and risk assets. So, the key point of the upcoming Bank of Japan meeting isn't whether to hike rates, but how to do it — especially whether that additional 50 basis points will actually be implemented.

It's worth noting that Takashi Saito recently mentioned that "fiscal policy will not be excessively tightening," which sent a positive signal to the market. If rate hikes are carried out gradually and in stages, even with the potential for 50 basis points, the impact on risk markets will be significantly reduced. This gradual shift from short-term negative to diminishing marginal effects makes it easier for the market to digest.

Right now, everyone is waiting for the Bank of Japan meeting to conclude. The press conference with the governor tomorrow afternoon is definitely worth paying close attention to. Once the rate hike is confirmed, it will essentially be settled, but the "Quadruple Witching" on Friday could still temporarily suppress market sentiment.

If the yen hikes coincide with Quadruple Witching, it might actually give us a good "discount" window, allowing us to prepare for a rebound in assets after Christmas.