Last July, the Bank of Japan raised interest rates, causing the Nikkei Index to plummet 12% in a single day and triggering the circuit breaker mechanism. Global stock markets followed with volatility. Now, Japanese interest rates have risen to 0.75%, the highest since 1995, yet the Nikkei only fell by 0.3%, and US and A-shares markets barely reacted—what is the underlying reason behind this calm?

**The market has long been "spoiled," turning black swans into white swans**

This rate hike was not an unexpected shock. From a probability perspective, this move was a 98% chance "showdown." Decision-makers started signaling as early as October, and in December, they kept "blowing the horn" one after another. Media, traders, and fund managers had a full two months to digest, adjust positions, and hedge. When the official decision was finally implemented, the market instead took it as "the bad news is all out." Comparing this to last July’s surprise "sneak attack" rate hike, it’s a world of difference—this time, even traders are complaining, "waiting for this day feels like an eternity."

**Carry trade is cooling off, impact significantly diminished**

Remember the days when yen carry trades stirred the global financial markets? That strategy is no longer as attractive. The scale of short yen positions has shrunk by more than half from its peak, and players are gradually withdrawing. The reasons are straightforward: the interest rate differential between the US and Japan is narrowing, yen volatility is rising, and borrowing yen for arbitrage has become less cost-effective. Even with the BOJ raising rates, there aren’t many positions to unwind, so it’s hard to cause any major turbulence.

**The central bank’s stance is "gentle tightening," providing reassurance to the market**

On the surface, the rate hitting a 30-year high sounds alarming. But the BOJ quickly clarified: don’t panic, our policy remains fundamentally accommodative. What does this mean? It indicates that the neutral interest rate level is still far off, and rate hikes will be "slow-cooked," not rushed. Why so gentle? It’s simple—Japan is burdened with government debt amounting to 220% of GDP, leaving no room or confidence for aggressive rate hikes. The market is well aware of this. This "mild tightening" actually reassures the market.

**Global central banks have formed a natural hedge**

Look at what other regions are doing: the Federal Reserve is cutting rates, and the European Central Bank continues to maintain an easing stance. This creates a balanced pattern of "tightening in Japan, easing in Europe and the US." US dollar liquidity remains ample, which can absorb potential capital inflows caused by Japanese rate hikes, preventing individual policy decisions from spiraling out of control.

To summarize the logic behind this calmness: it’s simply "fully digesting expectations + weakening the shock source + clarifying policy bottom line + global coordination for hedging." Instead of obsessing over the rate hike numbers themselves, it’s better to pay attention to policy signals and spring wage negotiations, which are the real variables that can influence the market. When the next rate hike arrives, will this stable situation persist? That’s a question worth pondering.