What impact will Japan's interest rate hike in December have on the global financial market?

In December, the Bank of Japan is very likely to raise interest rates, as stated clearly in the speech by Governor Kazuo Ueda.

The main reason is that Japan's GDP growth has exceeded expectations, with the GDP growth rate in the first half of the year reaching 0.9%, which is the real GDP after subtracting inflation.

If the Bank of Japan raises interest rates in December, will it turn into a situation like last August, where a black swan event caused the global financial market to crash? It seems unlikely.

This is because the crash last August was compounded by two factors: first, the Bank of Japan's sudden attack with no prior notice and no preparedness for the interest rate hike, while at that time, the short-selling pressure in Japan was very high. Borrowing yen to buy US assets (after the rate hike) temporarily forced traders to close positions in reverse trades, resulting in a global capital outflow from the US market.

This time, the situation is clearly different from last year, with significant improvements. After two rounds of carry trade unwinding last year and in April this year, the net position of yen against the dollar is now long, meaning that the short positions on the yen have significantly decreased compared to last August, and a black swan effect is unlikely to occur.

The second reason from last year was the US unemployment rate triggering the Sam Rule, causing global panic over financial recession and triggering a chain reaction, while this year there are no widespread other risk lows.

Furthermore, the Federal Reserve's interest rate cut on December 10 is imminent, bringing good news for global capital conditions and liquidity, rather than bad news.

Next, market volatility will fluctuate significantly, and from a long-term perspective, this may just be an opportunity for you to pick up chips.