This month in December 2025, there are two noteworthy things in the financial market
1: US Dollar interest rate cut (The financial industry basically understands this without the Federal Reserve needing to say much)
2: Yen interest rate hike (Many people have only a superficial understanding of this)
Today, the doctor will focus on discussing the potential impacts of the Japanese yen interest rate hike. For the market, the yen rate hike is definitely not a good signal. Let's review what happened to macro finance after the yen rate hikes from 2000 to today.
Overall, the yen has undergone 3 rate hike cycles in the past 20 years: once in 2000, again in 2007-2008, and a potential hike in 2024 and 2025. The period from 2024 to 2025 can be considered a cycle.
In the first two yen interest rate hike nodes, the 2000 global financial collapse of the internet bubble and the 2007-2008 yen interest rate hike triggered a global financial crisis. Both times the Nasdaq experienced a significant drop. Remember how much Bitcoin could withstand during the global financial plunge when compared to the dollar?
In 2024, the third interest rate cut for the yen occurred, during which the Nasdaq dropped by 15%. However, this interest rate cut may not be the end, as there could be further cuts this month. Cyclically, in 2000, 2007-2008, and 2024-2025, the biggest bubble in this round is the AI bubble. If the yen confirms another interest rate cut, it may have a significant impact on the financial market.
Why did the yen interest rate hike cause global financial effects? Because the yen has basically been at a 0% interest rate for the past 30 years, major financial institutions borrow money from Japan to invest in dollars. This has been the main liquidity source for the global financial market. Until today, the financial effect of this 0% interest rate yen is approximately 5 to 10 trillion dollars. All of this is borrowed leveraged funds. An interest rate hike in the yen necessitates a return of these funds, leading to capital withdrawal, which may trigger a financial panic.
However, everyone should not panic excessively; we still need to observe market nodes. If the Nasdaq, gold, and U.S. bonds are already in a correction phase, then the yen interest rate hike will lead to capital withdrawal and the market itself is bound to plummet. The implementation of the yen interest rate hike will undoubtedly hit hard, accelerating the market decline.
For the upcoming market, my advice to everyone is not to be too ambitious. Trade on the 30-minute/1-hour level, and ensure that long positions are protected. The market nodes are not very favorable; avoid making large trades. You can play with small positions in first-tier coins.
