FLOW OF CAPITAL RETURNING TO JAPAN: A SIGNIFICANT RISK FOR GLOBAL ASSETS?

Last week, international capital flows are rushing back to Japan, signaling a major shift in the global financial cycle. According to the Japanese Ministry of Finance, foreign investors net purchased 1.41 trillion yen in government bonds, the highest level in 8 months. The participation rate of foreign entities currently accounts for ~65% of bond transactions, compared to only 12% in 2009.

The core reason stems from the BoJ's monetary tightening cycle. After ending negative interest rates, the BoJ is expected to raise rates to 0.75% on December 19, and may increase further in 2026. Inflation is returning, wages are up >3%, helping Japan escape deflation but forcing the BoJ to act to protect the yen.

The risk lies in the yen carry trade. For over a decade, cheap capital from Japan has been used to invest in U.S. securities, AI stocks, and crypto. As Japanese interest rates rise, this capital flow may reverse, returning to purchase Japanese bonds.

Consequences: global risk assets face selling pressure, volatility increases significantly. The rate hike in July last year was just a "trial by fire"; this time, the scale could be much larger.

The market is entering a sensitive phase, where #BoJ could become the most significant variable. Keep an eye on the price of $BTC to decide on actions.