The Bank of Japan is preparing to raise interest rates at its December policy meeting, a move that would take the country’s benchmark rate to its highest level since 1995 and could ripple through global risk markets including crypto.
People familiar with the matter told Bloomberg that policymakers were leaning toward a 25 basis point hike to 0.75% at the Dec. 19 meeting, provided there is no major shock to global markets or Japan’s domestic outlook.
The yen strengthened after the report, rising from just above 155 to around 154.56 per dollar on Friday.
Such implications are reflected in the yen-funded carry trade, one of the oldest macroeconomic linkages in the financial world. Hedge funds and proprietary trading desks have historically borrowed yen at extremely low rates to finance leveraged positions in higher beta assets – a structure that persisted through nearly three decades of near-zero BoJ policy.
A move towards higher Japanese rates reduces the attractiveness of this trade and may force positioning adjustments in markets where leverage and liquidity are most sensitive, including Bitcoin.
A stronger yen typically coincides with a reduction in risk in macro portfolios, and this dynamic could tighten liquidity conditions that have recently helped Bitcoin rebound from November lows.
BTC slipped as low as $86,000 earlier in the week before rallying to over $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 rates, language similar to remarks made before previous hikes. Market prices now imply a probability of almost 90% for a development in December. Prime Minister Sanae Takaichi’s top ministers are not expected to oppose the change.
BoJ officials are also expected to signal that they are prepared to pursue further tightening if their outlook materializes, although they remain cautious about committing to that path.
For Bitcoin traders, the risk lies less in Japan’s final rate than in the directional break with a decades-old source of global liquidity.
If yen funding costs continue to rise, leveraged macro funds could reduce exposure to BTC and other high-volatility assets. But a gradual and controlled tightening by the BoJ, without a sharp fall in stocks, could have a limited impact in the short term, particularly with the increasing likelihood of a cut in US rates.
