The chain reaction in the global Capital Market is accelerating. Last week, the Bank of Japan announced the most significant policy adjustment in thirty years – raising the Benchmark Interest Rate from 0.5% to 0.75%, the highest level since 1995. This seemingly calm change in numbers could reshape the flow of global funds.

The logic behind it is straightforward: over the past thirty years, Japan's ultra-low interest rate environment has made the yen the cheapest financing currency in the world. This has given rise to a large-scale carry trade market—investors borrow yen in Japan at nearly zero interest rates, convert it into high-yield currencies like the US dollar and euro, and then invest in US stocks, US bonds, or other high-yield assets. What seems like a slim interest rate differential, when combined with leverage, turns into seemingly stable returns.

The question arises: Once the Bank of Japan's interest rate hike signals are established, the entire game rules will change. Traders who heavily rely on low-cost financing in yen will need to readjust their positions, which means that funds may be withdrawn from high-risk assets (including cryptocurrencies) and shifted towards more stable safe-haven assets. Retail and institutional investors who entered the market through carry trades are now reevaluating their costs.

The cryptocurrency market is particularly sensitive to this. Historically, every time there is a cycle of yen appreciation, it is accompanied by adjustments in risk assets. Traders have begun to closely monitor the subsequent actions of the Bank of Japan—when will the next policy shift come? This could become an important trigger for market volatility in the next phase.