The Japanese bond market has been a bit unstable recently.

On December 2nd, the 30-year Treasury yield soared to a record high of 3.405%, skyrocketing by 1.5 basis points in a single day. Behind this event are two clues: first, Japanese inflation cannot be stopped, and prices are still rising; second, the market is generally betting that the Bank of Japan will take action to raise interest rates by the end of the month.

More importantly, on Monday, Bank of Japan Governor Kazuo Ueda publicly stated that the upcoming meeting would "seriously discuss the issue of interest rate hikes." This statement solidified expectations for an interest rate hike. However, there is a subtle detail— the yield on 10-year government bonds remained unchanged at 1.875%, contrasting sharply with the wild movements of long-term government bonds.

What signal does this differentiation reveal? Japan's current situation is actually quite awkward. On one hand, inflation pressures are forcing the central bank to tighten policies; on the other hand, raising interest rates will directly increase borrowing costs, tightening the wallets of both businesses and the public, which will certainly affect consumption and investment.

But what really deserves vigilance is the global chain reaction. Japan has relied on ultra-low interest rate policies for decades to export liquidity, with a large amount of capital flowing into overseas markets. Once interest rates rise, this money may turn back and flow back to the domestic market, at which point the pool of funds in the global market will have to shrink. High-risk assets like cryptocurrencies are likely to be the first to bear the brunt—once liquidity tightens, price fluctuations are sure to follow.

So the focus going forward is to closely monitor the actions of the Bank of Japan: will they raise interest rates or not? By how much? How will they control the pace? The answers to these questions could directly determine the direction of the market by the end of the year.