Today, another person took 'Japan's real interest rates have risen' as a big deal, but I mentioned the day before yesterday — Japan's interest rate hike itself is not that exaggerated; the key is whether the interest rate differential structure has been damaged.

Japan's 10-year yield has surged to a new high, which looks frightening, but what we should really worry about is: the yen, the world's largest low-interest financing line, is starting to see costs rise.

For more than a decade, everyone has been using this line for business: borrowing cheap yen → buying high-yield assets.

U.S. Treasuries, U.S. stocks, corporate bonds, and then BTC, ETH, all have benefited from this dividend.

But now that financing costs have risen, while asset returns have not kept pace, the interest rate differential has been compressed, and leverage naturally becomes less attractive.

New funds are unwilling to rush too aggressively, and when old leverage is renewed, it can be a bit daunting:

'If interest rates rise again, am I working for nothing?'

Currently, this is just the first step: the market has realized that the interest rate differential is changing, but the pressure point has not really arrived. Next, we will look at three things:

1) Will Japan's 10-year yield be pushed to 1.3%–1.4%?

2) Will the Federal Reserve provide a clear and coherent interest rate cut path in December?

3) Can global front-end financing costs come down together?

If these three points do not align, the arbitrage chain will eventually break.

This market rebound is more like an emotional repair brought about by the Federal Reserve pausing its balance sheet reduction and the resurgence of interest rate cut expectations, and has nothing to do with 'Japan's interest rate risk being resolved.' The rise in yen interest rates will not collapse the market in one day, but it will gradually weaken its resilience.

In simple terms, it used to be that someone let you borrow money for free to earn 4% on U.S. Treasuries, but now suddenly says they will charge you 1% interest. This can be tolerated.

But when interest rates rise to 3% or 4%, you will definitely not continue; selling assets to repay the money would be the normal reaction.

The Federal Reserve has added a bit of liquidity, but the SLR issue has not been resolved, and the risk of recession has not been completely eliminated; it is too early to say that the trend has completely reversed.

However, institutions have already been quietly building positions, indicating that the window has indeed arrived; it's just that this stage is not about blindly acting, but about seeing opportunities while also being aware that risks are lurking nearby.