There are two major global market events to keep a close eye on in December: the Fed is expected to cut rates, and the Bank of Japan may raise rates.

Let’s start with the timing. For the Fed, the FOMC meeting is scheduled for December 9-10, and the market is broadly betting on a rate cut. The results will be announced at 2:00 p.m. Eastern Time on the 10th, which is 3:00 a.m. on the 11th in our time zone. Powell’s press conference will begin half an hour later.

The Bank of Japan meets a week later, on December 18-19. The decision will likely be announced around 11:00 a.m. Beijing time on the 19th, and Governor Ueda’s press conference will be around 3:00 p.m. There are eight days between the two meetings—what will happen during and after this period? Honestly, no one can say for sure.

**What’s the biggest fear?** A black swan event hidden in the yen. If the Bank of Japan raises rates more than expected, global capital markets could crash instantly.

Why would a rate hike in Japan trigger a global selloff? The logic is actually pretty simple—for more than 20 years, the yen’s interest rate has been near zero, so hedge funds worldwide have been engaged in “yen carry trades”: borrowing yen at ultra-low cost and investing in U.S. stocks, Treasuries, emerging markets, or even crypto to earn the spread. The premise of this strategy is that the yen will always be cheap.

If the yen suddenly hikes rates sharply, borrowing costs skyrocket and these leveraged funds will have to unwind quickly—selling U.S. stocks, dumping Treasuries, pulling out of risk assets, exchanging dollars for yen to repay debt. At that point, no matter what you’re holding, you could be affected by the ensuing sell-off. Remember last August’s flash crash in global markets after the Bank of Japan’s surprise rate hike?

**So why is the Bank of Japan going against the Fed?**

On the surface, it’s about inflation pressures. Domestic prices in Japan have been rising for two years, wage negotiations are making progress, and the central bank wants to seize the opportunity to end the era of negative rates. But there’s a subtler reason—the yen has depreciated too much. When the Fed aggressively hiked rates and the BOJ stood still, USD/JPY broke 150, Japanese companies’ import costs soared, and the public was disgruntled. Raising rates can strengthen the yen and ease imported inflation.

But will the U.S. accept this? The Fed is just beginning a rate-cutting cycle to inject liquidity and stimulate the economy. If Japan tightens by hiking rates at this moment, it’s like drawing blood from America’s veins—massive amounts of dollars will flow back to Japan to buy yen assets. The Trump administration hated nothing more than other countries manipulating exchange rates to their own advantage.

**So what should we do in the next two weeks?**

A few suggestions:
1. Don’t go all in. Around these two December meetings, volatility will definitely spike, and keeping light positions will help you sleep at night.
2. Watch the yen closely. If USD/JPY drops rapidly (yen appreciates), that’s a signal that carry trades are being unwound and risk assets will be under pressure.
3. Prepare cash. If there’s a bigger-than-expected rate hike, there might be a buying opportunity—but only if you have dry powder ready.
4. Don’t blindly buy the dip. Panic sell-offs often come in several waves. If you jump in after the first plunge, you could get chopped up by the next few.

With half a month left in December, keep a close eye on your assets first. In the market, what you think is an opportunity could actually be a trap waiting to snap shut.