Japan Signals More Hikes: Bitcoin Has Crashed After Every Single One

Bank of Japan Governor Kazuo Ueda used his first public look of 2026 to ship an unmistakable message: the central financial institution’s rate-hiking cycle is much from over.

The feedback got here roughly two weeks after the BOJ raised its benchmark rate to 0.75% on December 19—the best degree since 1995. That resolution, nonetheless, was overshadowed by Ueda’s imprecise steering on future hikes, which dissatisfied markets and despatched the yen tumbling to file lows in opposition to the euro and Swiss franc. His New Year remarks seem designed to appropriate that messaging.

Bond Markets React

“We will maintain elevating charges according to enchancment within the economic system and inflation,” Ueda said Monday at a New Year’s convention hosted by the Japanese Bankers Association. “The acceptable adjustment of financial easing will result in the achievement of secure inflation goal and longer-term financial progress.”

Shortly earlier than Ueda’s speech, Japan’s benchmark 10-year bond yield continued its ascent, reaching its highest degree since 1999. The transfer displays rising market conviction that additional charge will increase are on the way in which.

Most BOJ watchers count on the following hike round mid-2026, although some analysts warn it may come sooner if yen weak spot persists. The foreign money was buying and selling round 157.15 per greenback at noon in Tokyo—uncomfortably near the 160 threshold that market contributors consider may set off authorities intervention.

Last summer season, Japanese authorities offered roughly $100 billion to defend the foreign money at comparable ranges. Vice Finance Minister Atsushi Mimura warned last month that officers are ready to take “acceptable motion” in opposition to extreme foreign money strikes.

Structural Risks Lurking

The BOJ itself acknowledged in late December that “Japan’s actual coverage rate of interest is by far on the lowest degree globally.” Despite rising to 0.75%, inflation operating at 2.9% retains the true charge profoundly damaging at roughly -2.15%. The central financial institution famous there stays “appreciable distance to the impartial rate of interest degree”—signaling probably 100-175 foundation factors of extra hikes forward.

The pressure is already exhibiting in Japan’s monetary system. Norinchukin Bank, the agricultural cooperative lender, reported $12.6 billion in losses and was compelled to promote $63 billion in international bonds. Regional banks are sitting on roughly ¥3.3 trillion in unrealized losses, up 260% since March 2024, as rising yields erode the worth of their bond holdings.

In a symbolic shift, Germany overtook Japan because the world’s largest creditor nation late final yr—the primary time in 34 years. The reversal underscores that Japan’s capital outflows, which as soon as funded international markets, are starting to reverse.

What It Means for Bitcoin

For crypto markets, the BOJ’s hawkish pivot raises acquainted considerations. Bitcoin has fallen 20-31% following every of the previous three BOJ charge hikes, because the unwinding of yen carry trades drains liquidity from international danger belongings.

The mechanism is easy: for many years, traders borrowed yen at near-zero charges to fund investments in higher-yielding belongings worldwide, together with cryptocurrencies. As Japanese charges rise, this commerce turns into more and more unprofitable, forcing place liquidations throughout markets.

The August 2024 flash crash gives a stark reminder of what can occur when these positions unwind quickly. When the BOJ raised charges with out specific advance signaling, the Nikkei plunged 12% in a single day, and Bitcoin tumbled alongside it.

For now, the yen’s muted response to Ueda’s feedback suggests markets are ready for motion fairly than phrases. The carry commerce stays intact so long as yen weak spot persists and actual rate of interest differentials favor the greenback—presently exceeding 3.5 proportion factors.

Looking Ahead

The BOJ’s subsequent coverage resolution on January 23 will likely be pivotal. If officers ship one other charge hike or sign accelerated tightening, the yen may strengthen sharply, triggering the type of speedy carry commerce unwinding that has traditionally pressured crypto markets.

Conversely, continued coverage ambiguity would doubtless lengthen the present uneasy calm—however at the price of additional yen depreciation and rising intervention dangers.

Either means, crypto merchants ought to stay alert to Japan-driven volatility within the weeks forward. As Robin Brooks of the Brookings Institution warned, Japan is strolling a tightrope “between foreign money debasement and a debt disaster.” How it navigates that stability can have penalties far past Tokyo.

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