The biggest black swan in the market right now isn’t the Federal Reserve, but Japan.

Today, I’m going to give a detailed explanation of why Japan has suddenly become this black swan.

I’ll try to avoid professional jargon in this explanation and explain the underlying principles from a beginner’s perspective.

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Chapter 1: "Japan’s Lost 30 Years"

Over the past 30 years, Japan’s economy has been like a sick old man, suffering from “deflation.” The prices of goods in supermarkets kept dropping every day. You’d think things would be cheaper tomorrow, so you decided to “wait a bit longer.” Everyone thought this way, so no one spent money. Factories couldn’t make a profit, so they had to cut salaries and lay off workers. People had even less money to spend, and a vicious cycle began. So the Bank of Japan started to take drastic measures. To force people to spend money, the central bank lowered interest rates to zero, or even negative. That meant putting money in the bank not only didn’t earn you interest, but you actually had to pay a fee.

Since borrowing Japanese yen was almost interest-free, smart people around the world (hedge funds, Wall Street big shots, Warren Buffett) came up with a money-making trick called the “yen carry trade.” They borrowed yen in Japan, exchanged it for US dollars, and used it to buy US Treasury bonds (with 5% interest), or to buy Bitcoin, US stocks, etc. For decades, Japan was like a “free ATM,” constantly lending money to the world for stock and crypto speculation.

Chapter 2: "The Big Shift—Japan Awakens"

In 2024, things changed. Not only did Japan’s economy recover, it got a bit “over-excited.” Prices started rising (inflation), and more importantly, bosses finally agreed to give big pay raises. With higher wages, people dared to spend, so prices kept rising. The Bank of Japan thought, “Now that the economy is normal, I can’t keep giving away free money.” So they decided to hike rates. At the end of July 2024, the Bank of Japan raised the interest rate from 0.1% to 0.25%. You might ask, “It’s just a 0.15% increase, what’s the big deal?” But for those who borrowed billions to play with leverage, this is catastrophic. In fact, according to statistics, the total amount the world has borrowed from Japan isn’t just tens or hundreds of billions—it’s nearly “$20 trillion!”

The cost of borrowing has gone up and the yen has become more valuable. For the money borrowed before, you originally only needed to pay back $60 million, but with the yen’s appreciation, you suddenly need to pay back $70 million. Everyone thought at the same time, “Quick, sell my US stocks, US bonds, Bitcoin, and convert back to yen to repay the debt!” The Japanese stock market dropped 12.4% in a single day, setting a record. This is the famous “Black Monday.” Around the same time, Bitcoin fell nearly 18%. Whenever global debts need to be repaid, Bitcoin is always the first asset to be sold.

Chapter 3: "Will the Black Swan Arrive as Expected?"
If you understand the above logic, you’ll know that if Japan maintains zero interest rates, it can push up global financial assets. Conversely, if it raises rates, the whole trade will reverse into a “death spiral” and capital will be forced to exit. It’s not whether you want to sell—it’s that you must sell.

Now, for the first time, the world is facing a reality: Japan is no longer at zero interest rates. The market doesn’t fear whether rates will rise, but “when the stampede will start.”

Japan’s 10-year government bond yield is now approaching 2%, returning to levels from 17 years ago. The goalie can barely hold the line. If they force it, the yen’s exchange rate will collapse; if they give up, interest rates will soar. Between two evils, the central bank can only choose the lesser and gradually hike rates in line with the market.

In addition, the Bank of Japan revealed its intentions in advance this time. The governor directly mentioned the December meeting last week, saying “decisions will be made as appropriate.” Historically, Japan has always been “tight-lipped”—they didn’t announce hikes, they explained after the fact. But now they’re proactively hawkish, actually testing the market’s tolerance. Let the market react first—if nothing crashes, they’ll go ahead with rate hikes. If the reaction is too intense, they’ll come up with something else. But the general direction won’t change much.

So Japan’s rate hike is almost certain, because raising rates is good for Japan’s economy. This is not an accident, but a trend. What’s uncertain is the pace and magnitude of the hikes, as well as other accompanying measures.

Finally, will Japan’s rate hike turn into a super “black swan” that crushes global markets? No one can be 100% sure. But in this era full of uncertainty, we must build a “dam” of risk awareness in advance. The core issue is not predicting the future, but asking yourself: “If the flood really comes, can my current positions withstand it?”

Only by protecting your principal in the storm will you truly hold the ticket to the next spring.
#十二月降息预测