The Fed and the Bank of Japan might hike rates in the same week I wrote before that the market has already priced in a 25 basis point rate hike by the Bank of Japan in September. Japan's 10-year government bond yield has already surpassed 3%, and the yen has partially reflected the rate hike expectations. So, a standalone rate hike by Japan might not cause a significant shock to the market. But if the Fed hikes rates this week first, and then the Bank of Japan raises rates from 1% to 1.25%, the market impact could be much worse. After the Fed raises rates, the cost of dollar financing will continue to rise. The U.S. 10-year Treasury yield has already surpassed 5%. If Japan hikes rates at this time, it would mean that the two most important global funding currencies are becoming more expensive simultaneously. Borrowing in dollars becomes costlier, and the long-standing low-interest yen carry trade will continue to shrink. Previously, many institutions could borrow low-interest yen to buy U.S. stocks, U.S. bonds, and other risk assets. Now, with Japan's rates rising and the yen potentially appreciating, these positions will face higher financing costs and currency losses. Naturally, highly leveraged funds will choose to reduce their positions. Another impact is on Japan's domestic capital. In the past, Japan's domestic yields were too low, so a large amount of insurance, banking, and pension funds had to go overseas to seek returns. Now that Japan's 10-year government bond yield has exceeded 3%, if the Bank of Japan continues to hike rates, Japanese domestic bonds will become even more attractive. Japanese funds will have less need to buy U.S. Treasuries. Meanwhile, the U.S. still needs to issue a large amount of debt, and with fewer Japanese buyers, it will be even harder for U.S. Treasury yields to come down. So, if the Fed hikes rates first and the Bank of Japan follows, dollar funding becomes more expensive, yen carry trades shrink, Japanese funds flow back home, and U.S. long-term Treasury yields remain high—all of these things will happen simultaneously. Especially with the Fed's dot plot coming out this week, if the dot plot turns out to be hawkish on top of everything else, it's going to be really tough. @Gate Crypto, U.S. stocks, Hong Kong stocks, Korean stocks, gold, CFDs, prediction markets—all in one place for trading.