The Japanese yen's interest rate hike, through the core transmission chain of carry trade liquidation, has triggered a restructuring of global capital liquidity, resulting in multidimensional impacts on the stock market, bond market, foreign exchange market, and cryptocurrency market, with emerging markets and high-yield assets being the most affected. The specific impacts are as follows:
1. Global stock markets are experiencing widespread declines, with significant differentiation between sectors and regions.
The Japanese stock market is the most affected, with the Nikkei 225 index dropping 2% in a single day. With the expectation of interest rate hikes in December 2025, Japanese government bond yields surged, triggering a sell-off in the stock market.
U.S. technology stocks are under significant pressure, with the Nasdaq index dropping 1.5% due to the withdrawal of carry trade funds. Goldman Sachs estimates that if Japan raises interest rates by 25 basis points, the Nasdaq could pull back by 5-8%.
Emerging markets are severely affected, with Vietnam's VN30 index plummeting by 3.5% and India's Sensex index falling over 2%. Markets with a high proportion of foreign capital face risks of capital outflows; meanwhile, A-shares are relatively limited in impact due to the foreign capital's carry trade accounting for less than 5%.
2. The bond market experiences extreme volatility, and Japan's debt pressure intensifies.
Japanese government bonds are facing a wave of selling, with the 20-year bond yield rising to 4.2% (a new high since 1999) and the 30-year bond breaking 4.5%. Government interest expenses may exceed 10 trillion yen, accounting for 15% of fiscal expenditure.
The global bond market is undergoing a restructuring of funds, with US Treasuries and emerging market bonds facing selling pressure. There are significant signs of foreign capital withdrawal from the bond markets of countries like India and Vietnam.
3. The foreign exchange market and carry trades are being restructured.
The yen exchange rate surged, rebounding against the US dollar from 157:1 to 154.66. The foreign exchange losses from the carry trade, combined with rising financing costs, create dual pressure, and the unwinding of $30 trillion in carry trades triggers a tightening of global liquidity.
The US dollar index weakens due to the appreciation of the yen, diminishing the exchange rate competitiveness of Asian export-oriented economies.
4. Cryptocurrencies and commodities are under pressure.
Bitcoin fell sharply by 6% in a single day, dropping from $48,000 to $45,000. A cooling risk appetite leads to the sell-off of crypto assets.
The appreciation of the yen reduces Japan's import costs, and commodity prices are under downward pressure, with increased volatility in crude oil, industrial metals, and other products.
However, the current carry trade positions have reduced by 50%-70% compared to 2024, and the Federal Reserve's interest rate cut expectations can partially offset liquidity pressures. The impact of this round of interest rate hikes on the global market is expected to be less than the 'Black Monday' of 2024.
