Interest rate hikes in Japan and Bitcoin: Should the market be worried?

Japanese Central Bank Ready for Decision

Bank of Japan (BOJ) is approaching a critical decision on December 18-19, 2025. Traders forecast a 0.25 percentage point rate hike, which would raise the rate to 0.75% – the highest since 1995. Ten-year bond yields in Japan remain near 1.95%, well above the expected new base rate.

Importantly, this decision is not a surprise to the markets. Analysts indicate that both institutional investors and speculators are already prepared. The contrast with August 2025 is clear – back then, a sudden increase caused panic in the markets. This time, the probability of this decision is estimated at 76%, and the yen (although it has slightly strengthened by 0.03%) remains under structural pressure.

Bitcoin in Fork: Japanese Pressure vs. American Relief

Bitcoin is actually influenced by conflicting impulses. From Japan, rate hikes traditionally reduce the attractiveness of financing in yen – a mechanism known as carry trade – which could direct capital away from risky assets. Meanwhile, rate cuts by the Federal Reserve create new liquidity in the system.

Prices in Japan are one of the signals, but BTC does not react to them in isolation. In mid-December, Bitcoin hovers around $91,550 – a significant drop from the record $126,080 in the past, but the dynamics are variable. In 2024, high US interest rates hampered markets. Today, their gradual decline provides a cushion for risk assets. Bitcoin ETF funds, despite massive outflows in November, are in a less hostile environment than a year ago.

What Really Threatens Bitcoin?

Although yen carry trade headlines attract media attention, the real threats to BTC lie elsewhere. The first risk is a potential reversal by the Fed in 2026 – an unexpected shift toward tightening monetary policy. The second issue is increasing regulatory pressures, especially on ETFs and stablecoins.

The third factor is the slowdown in institutional adoption, often portrayed as a growth driver. Finally, competition from traditional assets – gold, tech stocks – could intensify if bond yields become too attractive for conservative portfolios.

In the short term, BTC is likely to consolidate in the $85,000–$95,000 range. Long-term, its future depends less on the Bank of Japan’s decisions and more on the US ability to maintain an expansive monetary environment.

Summary: Japan is Noise, Not Signal

Bitcoin has repeatedly proven resilience to monetary shocks from individual countries. This time, the test will not be too severe – the BOJ decision is widely analyzed and priced in. The actual future of the cryptocurrency will be shaped by Fed policies, regulatory environment, and institutional capital flows in 2026. Rate hikes in Japan are part of a bigger picture, but not necessarily the most decisive element.