The Bank of Japan may raise interest rates next, so everyone should pay attention to this.

Why would a rate hike in Japan have a huge impact on the financial markets? Because the entire world is using yen leverage.
Japan has had long-term zero or negative interest rates, so borrowing yen has almost no cost. For years, global capital has been doing one thing: borrow yen → exchange for US dollars → go all-in on various high-yield assets worldwide. US stocks, bonds, emerging markets, cryptocurrency markets, and even A-shares have all benefited from this wave.

But once Japan starts raising interest rates, this playbook reverses:
The cost of borrowing yen rises, making arbitrage unprofitable → funds have to close positions → sell assets to repay debt
Sell stocks, sell bonds, sell crypto—everything gets dumped → convert back to yen to repay loans → yen continues to appreciate
The yen's appreciation forces more people to close positions → global deleveraging happens together

This is the “death spiral,” the same logic as DeFi liquidations in the past, except this time it’s a global asset version of Lehman liquidation.

So when Japan raises rates, it doesn’t just affect the yen—it signals the beginning of the financial system’s leverage chain being reeled in. The real killer isn’t the news itself, but the reversal of leverage.

It’s important to pay some attention to this kind of structural risk.