The market has been fixated on one thing in recent months:
When will the FED ease?
The problem itself is not wrong.
But it is lacking.
Because the move currently playing the global balance is coming not from Washington, but from Tokyo.
Moreover, not loudly.
Japan has been the silent balancing element of the system for years.
Negative interest, unlimited bond purchases, suppressed yield curve…
These were not aggressive policies.
They were mandatory choices bearing the burden of the global system.
The issue is:
This burden can no longer be carried.
Inflation in Japan no longer fits the definition of 'temporary'.
Wage increases are limited but persistent.
A weak yen kept exporters afloat, yes.
But at the same time, it eroded domestic demand, diminished purchasing power.
There is a clear but disturbing equation in front of the BOJ.
If it keeps interest rates low:
Pressure on the yen is increasing, and capital outflows are accelerating.
If it moves towards normalization:
The global carry mechanism revolving around the yen for years is starting to unravel.
These two cannot be controlled at the same time.
History comes into play here.
in 1998 and 2006 when Japan was about to change direction,
Everyone later realized where the stress in markets outside the US came from.
There is a closer example.
Even just the loosening of yield curve control in 2022-2023
created a chain reaction in the securities and FX side.
The reason is simple:
The Japanese yen is not just a currency.
The cheapest fuel in the global leverage system.
When that fuel starts to become expensive,
risk appetite gets squeezed in practice, not in theory.
Exactly this is what is happening today.
The BOJ took a symbolic interest rate step.
YCC has effectively been rendered nonfunctional.
But the language of communication is still cautious.
This is not a state of indecision.
This is a transition strategy.
They don’t want to create shock in one go.
But they are not hiding the direction either.
The market usually reads this late.
First, it is called 'insignificant'.
Then the yen strengthens.
Then carry positions quietly close.
The latest liquidity starts to be discussed.
We are currently exactly in this range.
The FED may lower rates. This is possible.
But at the same time, it is difficult for global risky assets to relax permanently while the BOJ is tightening.
Bitcoin may rise.
But it is not easy to establish balance before the unraveling caused by the yen is over.
Therefore, reading the table with a single central bank is incomplete.
Japan does not make headlines. But it holds the most critical screw of the system.
Today that screw is slowly tightening.
