In-depth analysis of three global financial events: Bank of Japan's record interest rate hike, massive EU loans to Ukraine, and the synchronized rise of US stocks and gold
1. The Bank of Japan raises interest rates to 0.75% for the first time in 30 years: A tightening cycle begins but the impact is limited
The Bank of Japan announced at its December monetary policy meeting a 25 basis points increase in the policy interest rate to 0.75%, the highest level since the burst of the economic bubble in 1990, marking a formal shift from 23 years of ultra-loose monetary policy. Prior to this rate hike, the market had already priced in over 90% of the tightening expectations through the yen exchange rate (USD/JPY depreciating from 151 to 142) and the yield on Japanese government bonds (10-year government bond yield rising to 0.92%), resulting in a 1.2% increase in the Tokyo stock market after the decision was announced, while the yen briefly spiked against the dollar before retreating.
From the policy details, the Bank of Japan has retained the flexibility of the 'yield curve control' tool, allowing the yield on 10-year government bonds to fluctuate within a ±1% range, and emphasized that 'future interest rate hikes will depend on whether the wage-price spiral continues'. Japan's core CPI year-on-year remains high at 2.8%, but the inflation growth rate in the service sector has slowed to 1.5%, indicating that domestic demand recovery is not yet solid. For the global market, this interest rate hike may trigger some unwinding of yen carry trades (according to BIS data, the current scale of yen carry trades is about $1.2 trillion), but considering that the Fed has entered a rate-cutting cycle (with a cumulative rate cut of 150 basis points by 2025), the outflow pressure will be weaker than during the three rate hikes in 2024.
II. EU approves €90 billion loan to Ukraine: balancing economic risks under political maneuvering
The European Council has officially approved a €90 billion loan plan for Ukraine for 2026-2027, of which €60 billion will be used for budget support, and €30 billion will be specifically for energy and infrastructure reconstruction. This plan requires funding through EU budget guarantees (20%) and bilateral guarantees from member states (80%), with Germany (22%), France (19%), and Italy (14%) bearing the main guarantee responsibilities.
The annualized interest rate of this loan is expected to be between 3.8% and 4.2%, far lower than Ukraine's current 18% government bond yield, which will reduce the Ukrainian government's financing costs by over 100 billion dollars. However, the controversial point is 'debt sustainability' — Ukraine's current external debt/GDP ratio has reached 95%, and new loans will increase its repayment pressure to 45% of GDP by 2030. The EU has also added 'reform conditions', requiring Ukraine to advance judicial anti-corruption and energy market reforms, which may delay the disbursement of funds. The market is concerned that if the conflict in Ukraine is not resolved by 2026, this plan may evolve into a 'debt trap', exacerbating the risk of fiscal divergence in the Eurozone.
III. U.S. stocks' NASDAQ rises 1.31% while gold breaks $4350: risk assets and safe-haven assets strengthen simultaneously
The three major U.S. stock indices closed higher collectively, with the NASDAQ leading the way up 1.31%. Technology stocks (NVIDIA +2.8%, Microsoft +1.9%) and AI-related sectors (Palantir +5.7%) performed outstandingly, while the S&P 500 index stabilized above the 5800-point threshold. Contributing factors include: 1) The Fed's 'streamlined main account' plan boosting market risk appetite; 2) Micron Technology's earnings report exceeding expectations, with AI chip demand guidance raised; 3) The yield on 10-year U.S. Treasury bonds falling to 3.75%, easing valuation pressure on growth stocks.
Meanwhile, spot gold has broken through $4350 per ounce, reaching a historic high, forming a rare pattern of simultaneous rises in 'stocks + gold'. The underlying support is based on multiple logics: 1) geopolitical risk premium (tensions in the Middle East + ongoing Russia-Ukraine conflict); 2) continuous gold purchases by global central banks (net purchases of 1120 tons in the first 11 months before 2025); 3) declining real interest rates (the yield on 10-year TIPS in the U.S. has fallen to 1.2%). COMEX gold futures open interest has increased to 650,000 contracts, indicating that speculative funds are accelerating their entry, with bullish targets looking towards $4500 after breaking through the key resistance at $4200.
These three major events collectively reflect the complexity of the current global economy: divergence in major central bank policies, intensified geopolitical disturbances, and diversified asset pricing logic. Investors need to pay attention to the transmission effect of Japan's interest rate hike on Asian currencies, the execution rhythm of the EU's aid plan for Ukraine, and whether the divergence between U.S. stocks and gold can continue.
