The Bank of Japan is preparing to raise interest rates at its December policy meeting, a move that would raise the country’s benchmark rate to its highest level since 1995 and potentially ripple through global risk markets, including crypto.
People familiar with the matter told Bloomberg that policymakers are leaning toward a 25 basis point hike to 0.75% at the Dec. 19 meeting, contingent on there being no major shock to global markets or Japan’s domestic outlook.
The yen strengthened after the report, rising from just over 155 to around 154.56 per dollar on Friday.
Such implications are found in the yen-financed carry trade, one of the oldest macroeconomic linkages in the financial world. Hedge funds and proprietary trading desks have historically borrowed yen at ultra-low rates to fund leveraged positions in higher-beta assets, a structure that persisted through nearly three decades of near-zero BOJ policy.
A shift toward higher Japanese rates reduces the attractiveness of that trade and may force positioning adjustments in markets where leverage and liquidity are more sensitive, including bitcoin.
A stronger yen typically coincides with de-risking in macro portfolios, and that dynamic could tighten liquidity conditions that recently helped bitcoin recover from November lows.
BTC fell towards $86,000 earlier in the week before recovering above $93,000 alongside US stocks, and remains heavily influenced by global rate expectations after a month of macroeconomic-driven volatility.
Gov. Kazuo Ueda signaled Monday that the board would make an “appropriate decision” on the rates, in language similar to comments made before previous increases. Market prices now imply a nearly 90% chance of a December move. Prime Minister Sanae Takaichi’s key ministers are not expected to oppose the change.
Bank of Japan officials are also likely to indicate they are willing to tighten further if their prospects materialize, although they remain cautious about committing to a tightening path.
For bitcoin traders, the risk has less to do with Japan’s terminal rate and more to do with the directional breakdown of a decades-old source of global liquidity.
If yen funding costs continue to rise, leveraged macro funds may trim exposure to BTC and other high-volatility assets. But a controlled, gradual tightening by the Bank of Japan, without sharp declines in stocks, may have a limited impact in the short term, especially as the odds of a U.S. rate cut increase.
