Japan's interest rate policy reversal: Global carry trade faces liquidation, and the crypto market needs to be vigilant of macro risks

Market Alarm: Don’t Catch This Flying Knife Again

The recent pump and dump in the crypto world may seem intense but is actually weak—true risk isn’t in the technicals, but in the thirty-year-old financial foundation that’s cracking beneath.

The Truth About Thirty Years of Carry Trade

It’s quite significant: this mechanism of arbitraging Japanese yen has supported the entire global financial system. Over the past thirty years, institutions have exchanged zero-interest-rate yen for dollars, then bought assets worldwide—US stocks, bonds, real estate, and even crypto assets—trillions of dollars have been essentially free money. As long as Japan maintains ultra-low interest rates, this game can go on forever.

But the rules of the game will completely change in November 2025.

Turning Point: Unusual Surge in Japanese Long-Term Bond Yields

Japan’s 20-year government bond yield approaches 2.8%, and the 40-year yield has already surged to 3.7%—this isn’t normal adjustment but the spring that has been compressed for thirty years snapping all at once.

What does this mean?

First, borrowing yen is no longer a free lunch; financing costs are soaring. Second, currency fluctuations will intensify, and leveraged positions face the risk of being liquidated directly. Carry trades are shifting from “about to collapse” to “collapsing now”—trillions of dollars are turning back to Japan.

Chain Reaction of Liquidity Reverse Extraction

In the past, Japan was the global liquidity faucet, continuously supplying cheap funds. But in adverse conditions, it becomes a black hole—madly absorbing global capital. The liquidity in the entire market is being pulled back in reverse.

Compared to that, the recent volatility in the crypto space is just surface ripples. In the face of this macro tsunami, all technical analysis seems insignificant.

Final Warning

You might think you’re bottom-fishing, but essentially you’re catching chips thrown by others—those institutions have long been stepping on the ladder, ready to retreat at any moment. When global liquidity dries up, no one cares whether your technical indicators are perfect.

This wave is the real nuclear bomb that no one dares to mention.