Everyone is watching the Fed’s rate cuts, but what we should really be worried about is the Bank of Japan’s potential move next week.

Bitcoin’s rebound from $80,000 to $94,000 has already priced in most of the rate cut expectations. The real focus now is—what signals Powell will send in his speech, and whether Japan will actually raise rates.

Many people may have forgotten what happened after Japan ended its ultra-low interest rate policy in 1998. The Asian financial system took a direct hit—Indonesia and Thailand couldn’t handle the pressure, and South Korea nearly went bankrupt. The Fed made a symbolic 25 basis point rate cut, but then in early October, the yen appreciated sharply and US tech stocks crashed. In the end, the Fed was forced to slash rates by 75 basis points in one go just to barely stabilize things, after which US stocks rebounded aggressively.

Why is a yen rate hike so damaging? The logic is simple: Back then, global funds were borrowing yen like crazy to buy US Treasuries for arbitrage. Once the yen strengthened, everyone had to sell Treasuries to buy yen and pay back their loans, causing Treasury yields to spike and high-risk assets to suffer. This logic still holds true today.

Recently, CFTC and CME contract open interest has been rising, which feels like someone is lying in wait to take profits. The real killer move could come next week—a yen rate hike combined with the release of CPI data. If the CPI surges above expectations, the market will have to withstand the double blow of rate hikes and inflation, and volatility could get even scarier.

That’s why Powell’s tone is so important. If he cuts rates with dovish and mild statements, the market might be able to catch its breath and rebound. But if it’s a hawkish rate cut, and the Bank of Japan really does hike rates, it’s going to be very hard for the market to handle.