Japan’s central bank is a major wildcard in global markets, where it has been an outlier, while other major central banks have aggressively hiked rates to combat inflation. That may change when the BOJ holds its policy meeting on Friday.

The Nikkei is heading for its most significant weekly drop in a year, while bonds have been battered, and the yen is eyeing its most significant weekly gain in five months. Investors have been rushing out of bets that the BOJ will keep its ultra-loose monetary policies intact, spooked by the central bank’s latest comments on an “even more challenging” year ahead.

On Thursday, the BOJ watered down its enforcement of a cap on 10-year bond yields and suggested that it may be winding up its efforts to keep rates in negative territory. The yen was up nearly 2% on the day and soared above 144 to the dollar as investors worried that the BOJ might be gearing up for significant steps to lift rates out of negative territory.

That prospect is a primary concern for Japanese investors, with more than half of the country’s stocks trading in overseas markets. A sudden shift in yen/dollar rates would cause them to lose value on their foreign currency holdings and could depress share prices in the equities market.

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A sudden move away from Japan’s loose monetary policy could also have broader global implications, especially as many Japanese funds hold assets in other markets, including the United States, Europe, and Asia. If investors were forced to liquidate those positions quickly, it could fuel contagion across borders and asset classes that would ratchet global volatility, hurting risk assets such as equities and high-yield debt.

Despite the BOJ’s hints of an interest rate rise, experts say it is unlikely to take any significant action soon. Its policymakers are still grappling with a massive deflation problem that has lingered for decades as the nation’s population shrinks, keeping price growth and benchmark interest rates firmly in negative territory.

Amid this gloomy backdrop, shares in exporters were seen benefiting from a weaker yen. Honda Motor and Subaru advanced more than 2 percent, while chip-testing equipment maker Advantest jumped 1.86 percent. The Nikkei’s heavier weighting towards companies that make exports meant it was more affected by a weaker yen than other Asian markets, with shares of companies that get sales in dollars and euros falling.

Outside Japan, the MSCI’s broadest index of Asia-Pacific shares ex-Japan (.MIAPJ0000PUS) bounced 0.8%. In the United States, Treasuries were sold down slightly as investors braced for a report on US nonfarm payrolls due later in the day. The data is widely expected to show that the economy added 200,000 jobs in November, securing the jobless rate at 7.7%. The average hourly earnings measure is forecast to increase by 0.1% from October. The report is due at 12:30 p.m. (2330 GMT).