In the financial markets this December, everyone is watching the Fed’s moves, but what’s truly worth paying attention to is the Bank of Japan—it’s quietly turning into a global capital super-reservoir.

Let’s look at the current situation: the Fed is basically set to cut rates by 25 basis points in December, and will stop quantitative tightening from December 1, effectively ending three years of QT. But over in Japan? The central bank might hike rates straight to 0.75%, which would be a historic high since 1995. One is loosening, the other is tightening—the balance of global liquidity is shifting.

Japan’s taking real action this time, and it’s not on a whim. The market now puts the probability of a 25bps hike in December at 85%, up from 50%. The logic is straightforward—domestic inflation pressure is clear, and the economic data is still holding up, so they have no choice but to hike.

Here’s where it gets interesting: the Fed is loosening because economic growth is cooling and they need to stimulate it; the Bank of Japan is hiking to avoid risks. The result? The liquidity released by the Fed could flow directly into Japan, turning it into a natural capital reservoir.

How will this policy mix affect the markets? US stocks will definitely face short-term pressure; in the long term, it depends on whether corporate earnings can hold up. Crypto is likely to take a big hit—risk-off sentiment will spike, and volatility will be significant. US Treasury yields are very likely to swing higher in the short term.

That said, a 0.75% rate is still loose by global standards, and the Bank of Japan will probably take a gradual approach to further hikes. At this point, whether they hike or not is almost a done deal; the new uncertainty is how Kazuo Ueda will communicate after the hike, and what signals the policy guidance will send.

On December 19, both the Bank of Japan’s decision and the Fed’s rate cut decision will be announced one after the other, and global capital will realign. Retail investors shouldn’t panic—just keep a close eye on the core logic of your assets.