Japan is calling for interest rate hikes again, but this time it might really happen, unlike before when it was just empty talk.

Japan's 2-year government bond yield has broken 1% for the first time in 17 years, meaning Japan has officially exited the zero interest rate era. This change is not just about Japan raising interest rates; it signifies a repricing of global capital flows.

Why is this important? Because the yen is the world's largest funding currency. In the past, everyone was accustomed to borrowing in low-interest yen and then investing in global markets with higher yields — this is a typical carry trade.

When Japanese interest rates rise, this cheap funding channel will begin to shrink. The result is that the structure of global liquidity will be forced to adjust, and the volatility of risk assets will also increase.