Japan Set to Hike Rates to 30-Year High, Posing Another Threat to BTC

The Bank of Japan (BoJ) is anticipated to raise its policy rate by 25 basis points to 0.75% on December 19th, marking the highest level in about 30 years. Historically, developments in Japan, such as a stronger yen resulting from rate hikes, have been bearish for Bitcoin (BTC) and the broader crypto market by tightening global liquidity conditions. This is largely due to the potential unwinding of the yen carry trade, where traders borrow cheap yen to fund riskier assets like tech stocks and crypto. A similar BoJ hike in July 2024 caused BTC to drop from $65,000 to $50,000.

However, this time might differ because speculators are already holding net long positions in the yen, and Japanese bond yields have already risen significantly, suggesting the official hike is merely catching up to market expectations. Furthermore, the U.S. Federal Reserve recently cut rates and introduced liquidity measures, which lowers the odds of severe risk aversion. Despite these mitigating factors, Japan's high debt-to-GDP ratio (240%) under current fiscal expansion plans warrants monitoring as a future source of volatility.

(Source：CoinDesk)