On December 19, the Bank of Japan will announce its interest rate decision. To be honest, this is a much more serious matter than many people think.

Why do I say that? The yen is no longer just a simple currency—it has become the core tool for global carry trades. If there really is a rate hike, the chain reaction could be even more intense than the one triggered by Lehman Brothers in 2008.

Some might think this is exaggerated—Japan is just a small country, so how much of a ripple can it cause? That’s the misconception. Its influence is actually shockingly huge.

Let’s quickly go over the background: After the bubble burst in the early 1990s, Japan’s economy has been sluggish ever since. To rescue the market, the Bank of Japan began aggressive monetary easing. In February 1999, rates were cut directly to zero, and in 2016, they went even further with negative rates—if you put money in the bank, not only do you earn no interest, you actually have to pay.

Why go to such extremes? Because companies weren’t investing, consumers weren’t spending, and deflationary pressure was suffocating the economy. But after all these years of effort, Japan’s economy still hasn’t seen much improvement.

But here’s the problem: ultra-low interest rates made the yen the world’s cheapest funding currency. Massive amounts of money are borrowed in yen and invested in other high-yield assets, resulting in huge carry trades. If there’s a sudden rate hike now, all this leveraged money will unwind instantly, and liquidity will evaporate in a flash.

Stock markets, bond markets, crypto markets—none of them would be spared. So you really need to keep a close eye on December 19.