The signal of interest rate hikes in Japan has raised concerns in the U.S. market about "bloodletting," and the outlook for Fed rate cuts may change.

BlockBeats news, on December 2, as the largest overseas creditor of U.S. Treasury bonds, if Japan tightens its monetary policy, it may trigger a return of domestic funds from U.S. Treasury bonds and other overseas assets, thus interrupting the downward trend of U.S. Treasury yields and adding variables to the global market. On Monday, after Bank of Japan Governor Kazuo Ueda hinted at a possible interest rate hike later this month, global government bond yields generally rose (yields rise when bond prices fall). This statement surprised investors, who had expected the Bank of Japan to remain inactive. Ueda's remarks pushed the yield on Japan's 10-year government bonds up to 1.879%—the highest closing level since June 2008. The yield on U.S. 10-year Treasury bonds also rose to 4.095%, having been slightly below 4% in the middle of last week. Wall Street is concerned that the rise in Japanese bond yields will attract funds away from U.S. investments and lead to an increase in U.S. Treasury yields. Japan is the largest foreign creditor of the U.S. government, holding approximately $1.2 trillion in U.S. Treasury bonds as of September. The decline in U.S. Treasury yields this year has been a driving factor for the Fed to start cutting interest rates again, which has lowered mortgage rates and boosted the stock market—since the stock market often benefits from lower Treasury yields, as investors can no longer obtain the same risk-free returns simply by holding Treasury bonds to maturity. This signal of Japan tightening its monetary policy has also raised concerns about the Fed's interest rate cut prospects, as the rise in U.S. Treasury yields will become an obstacle to rate cuts.