Learning from history: After the Bank of Japan raises interest rates, it won't be long before the global market suffers.

The previous hints from the Governor of the Bank of Japan, Haruhiko Kuroda, that the central bank may raise interest rates as early as this month and end negative interest rates have clearly unsettled the market. It is hard not to recall that in the past, after the Bank of Japan raised interest rates, unfortunate events often followed, and even economic crises occurred shortly thereafter. One can't help but wonder if history will repeat itself this time.

According to media reports, on Thursday morning, Governor Kuroda stated in a speech to the parliament that it will become more challenging to handle monetary policy issues from the end of this year to next year, and there are various options available to adjust policy rates if interest rates are raised. These remarks have intensified speculation about the central bank's policy shift. Just the day before, Deputy Governor Masayoshi Amamiya hinted that the Bank of Japan may soon end the last negative interest rate policy in the world, making it the most explicit signal from the Bank of Japan's leadership so far.

These views indicate that the authorities are considering ending negative interest rates, further strengthening market expectations for interest rate hikes. The probability that the Bank of Japan will end negative interest rates this month has soared from 2% to 45% in the market. Many expect the Bank of Japan to gradually exit its ultra-loose policy next year, with some market participants betting that the Bank of Japan will take action in January. The reaction of the yen is predictable, as it has already strengthened against other major currencies, and the yen continued to rise on Thursday.

However, historical records show that shortly after the Bank of Japan raises interest rates, it often encounters unfortunate events, even economic crises. In the 1990s, the Bank of Japan maintained low interest rates of 0.5% for a long time and introduced zero interest rates in the late 1990s, but this failed to stimulate the Japanese economy to recover from the slump since the burst of the bubble in the 1980s. In August 2000, the Bank of Japan raised interest rates back to 0.25%, and at that time, the risks of the dot-com bubble still seemed manageable. Unfortunately, just two weeks after the Bank of Japan raised interest rates, the Nasdaq index began a decline that lasted for over two years.

A few years later, just as Japan was optimistic about the future under the leadership of former Prime Minister Junichiro Koizumi, the Bank of Japan raised interest rates twice in July 2006 and February 2007. Just a few months after the second interest rate hike, the US subprime mortgage crisis erupted, triggering a global financial crisis.

Analysis suggests that although there is no causal relationship between the Bank of Japan raising interest rates and economic crises, it can at least indicate that when the Bank of Japan ultimately decides to embark on a tightening policy, the economic cycle appears to be at the tail end, and other markets are about to face serious problems.

Therefore, some investment banks believe that the Bank of Japan will not end its negative interest rate policy soon. Financial blog ZeroHedge reported that UBS analysts expect the Bank of Japan to end its negative interest rate policy in April next year, while the market expects the Federal Reserve to cut interest rates twice in March and May next year. Historically, this situation has occurred before. After the Bank of Japan raised interest rates twice in 2000 and 2006, the Federal Reserve followed suit by lowering rates.

In other words, while the Bank of Japan's rate hikes may help curb inflation and bring prices back into deflation, raising rates also means that Japanese bonds will enter a new abyss. This could lead the Bank of Japan to return to zero interest rates and implement more quantitative easing. ZeroHedge also believes that the Bank of Japan may not raise rates quickly, or even at all, and the bank is unlikely to provide too much explanation for its actions.