Bank of Japan Rate Hike Could Pressure Bitcoin via Yen Carry Unwind
The Bank of Japan is set to raise interest rates at its December policy meeting, potentially lifting the benchmark rate to its highest level since 1995 and sending shockwaves through global risk markets, including cryptocurrencies.
Sources told Bloomberg that policymakers are considering a 25-basis-point hike to 0.75% at the Dec. 19 meeting, assuming no major shocks to global markets or Japan’s economy. The yen responded by strengthening from just above 155 to roughly 154.56 per dollar on Friday.
The move carries implications for the yen-funded carry trade, a longstanding mechanism in which hedge funds and trading desks borrow yen at ultra-low rates to fund leveraged positions in higher-yielding assets. Rising Japanese rates reduce the trade’s appeal and could trigger repositioning in markets where leverage and liquidity are most sensitive — including bitcoin.
A stronger yen often coincides with risk-off sentiment, tightening liquidity conditions that recently supported BTC’s rebound from November lows. Earlier this week, bitcoin fell toward $86,000 before recovering to over $93,000 alongside U.S. equities, reflecting ongoing sensitivity to global interest rate expectations.
BOJ Governor Kazuo Ueda signaled the board will make an “appropriate decision” on rates, while market pricing now implies nearly a 90% probability of a December hike. Officials may indicate readiness for further tightening but remain cautious about committing to a fixed path.
For bitcoin traders, the concern is less about Japan’s ultimate rate level and more about a potential disruption to decades of global liquidity. Rising yen funding costs could prompt leveraged funds to reduce exposure to BTC and other high-volatility assets, though a gradual, controlled tightening may limit near-term impact, especially as U.S. rate-cut expectations rise.
