The crypto market is on high alert as the Bank of Japan heads into its December 18–19 policy meeting, where a rate hike is nearly guaranteed. Prediction markets like Polymarket are pricing in a 98% probability that Japan will raise interest rates by 25 basis points—a move that could shake global markets far beyond Tokyo.
If the BOJ follows through, its policy rate would reach 0.75%, the highest in almost twenty years. While modest compared to global peers, this shift is meaningful because Japan has been the world’s go-to source for cheap leverage through the “yen carry ”trade”—borrowing yen at ultra-low rates to invest in riskier assets like stocks, bonds, and crypto.
With yields rising and the carry trade unwinding, liquidity in risk assets like Bitcoin is under pressure. Historically, Bitcoin has reacted sharply after BOJ hikes:
- March 2024: BTC down ~23%
- July 2024: BTC down ~25%
- January 2025: BTC down over ~30%
Now trading near $89,000, analysts warn Bitcoin could slump below $70,000 if this pattern repeats.
However, not all analysts are bearish. Some argue that if the U.S. Federal Reserve starts cutting rates while Japan tightens, the combination could actually fuel capital rotation into crypto, marking a “regime shift” rather than a liquidity drain.
In the short term, though, volatility seems inevitable. With global yields climbing and equities showing strain, the BOJ’s move might be the most pivotal macro event of the year for Bitcoin traders.
