📍 BOJ faces its biggest turning point in 30 years: The market is pricing in a 90% chance of raising interest rates to 0.75% on December 19 – the highest rate since 1995.

🔸Japan has officially ended the era of cheap money that lasted since the 1990s. For nearly 25 years, the Japanese economy has existed in a structure of deflation and ultra-loose policy. The BoJ has already "signaled" this shift throughout 2023-2024, but 2025 will be the official year they reverse policy. Persistent inflation, a weak yen, and wage pressures are forcing the BOJ to step out of its comfort zone.

🔸Bloomberg's OIS records the probability of a December rate hike climbing above 90%—the market is highly confident about this. In fact, the BoJ could even raise rates again in April 2026 to target a neutral rate in the 1.0–2.5% range.

🔸The BoJ's regime shift will have a significant impact because the flow of cheap money that has fueled asset classes worldwide is being cut off. Net capital flows may not necessarily return to Japan, but as borrowing costs rise, leveraged JPY positions will be closed. The JGB2Y yield breaking decades-old highs reflects half the story; the rest will depend on how global funds unwind carry trades in December.