Trading screens flicker with numbers, and analysts are on edge. Everyone is watching the same thing—the upcoming decision across the Pacific.

On December 19th, a serious group of officials will gather in the Bank of Japan’s meeting room. The two words they will say—rate hike—are enough to keep global fund managers awake at night.

What are they afraid of? Simply put, one question: Japan’s era of "free lunches" may really be coming to an end. Over the years, global investors have been playing the same game—borrowing yen, with interest rates nearly zero, then investing the money into high-yield projects around the world. This move was very profitable, until one day, lenders say "I want higher interest," and the game rules change completely.

**Inflation, this monster, has finally come knocking**

Japan can’t escape either. Prices have been breaking the 2% warning line for several months in a row, and the unemployment rate has long hovered below 3%—what does this mean? Wages are now ripe for growth. The spring labor negotiations next year are expected to be optimistic, with workers’ incomes increasing, leading to higher consumption, and prices climbing further… thus forming a vicious cycle.

Adding to the trouble, the Japanese government announced a fiscal stimulus plan of 21.3 trillion yen, which is like pouring oil on the flames of inflation. When these factors stack up, the Bank of Japan has no choice but to act.

**Is the risk really that big?**

The market is indeed trembling, but there’s a detail that’s easy to overlook—the most dangerous moment may already have passed. Sounds counterintuitive? But the data is right here. Since March last year, Japan has raised interest rates three times in a row. The market has already set its expectations. When the real impact will hit depends on what the central bank specifically says and does at this meeting.