On the first day of December, the Japanese financial market delivered a heavy blow to global investors.

In the stock market, the Nikkei 225 index once plummeted by over a thousand points during the session, eventually closing at 49,303 points, a single-day drop of 1.89%. Even more dramatic was the bond market—2-year government bond yields directly broke through the 1% mark, the first time since 2008. The 10-year government bond yield also soared to 1.85%, marking a 17-year high. Nikkei futures followed with a drop of over 2%, while the yen exchange rate rebounded to around 155.55.

What triggered this volatility? The Governor of the Bank of Japan, Kazuo Ueda, hinted a couple of days ago that an interest rate hike might happen this month. The market immediately erupted, with traders predicting that the likelihood of a rate hike in December has surged to 64%. Just think about it, Japan has maintained ultra-low interest rates for so many years, and now suddenly tightening policy will definitely reshuffle the flow of funds.

The cryptocurrency market has been severely impacted. Bitcoin has dropped below $86,000, falling over 5% in a single day; Ethereum has also declined over 5%; a number of altcoins have fallen more than 7%. The worst hit are the futures traders—over 210,000 people globally were liquidated within 24 hours, with total losses reaching $639 million. This wave of contagion is indeed fierce.

Ultimately, the recent trend of the yen is indeed complicated. The economic stimulus plan has yet to be implemented, and central bank officials are sending mixed signals, making the timing of a policy shift difficult to decipher. These uncertainties at the macro level will likely continue to stir market nerves in the short term.