Everyone is discussing Japan's rate hike, but many people haven't truly understood its significance.

A look at history shows why. During the internet bubble burst in 2000, Japan's rate hike was a key driver. In 2008, during the US subprime mortgage crisis, Japan's policy adjustments were also closely related. This is no coincidence—every time Japan raises interest rates, the global financial world trembles.

Why is the yen's rate hike so critical? Frankly, it's not as frequent as the US's rate hikes and cuts, which happen every few years or even decades. The yen serves as a unique liquidity tool among global risk assets. For a long time, Japan has maintained zero or even negative interest rates, and global institutions and investors have been continuously borrowing yen, leveraging it to trade stocks, buy bonds, and invest in cryptocurrencies. Borrowing at no cost makes these trades naturally attractive.

But once Japan raises interest rates, the game changes. The cost of borrowing suddenly rises, arbitrage opportunities shrink, and those trades sustained by low interest rates start to falter. The first reaction is liquidity tightening, followed by chain reactions of selling in gold, stocks, bonds, and crypto assets—because holding costs increase, assets depreciate, and panic can trigger a spiral of decline.

No one can predict exactly how the market will react, but Japan's previous two rate hikes have triggered market panic, and this time is unlikely to be mild. Reports suggest the target might be a 75 basis point increase, something Japan hasn't experienced in the past 30 years.

This is no small matter; it must be taken seriously.