Bank of Japan Hikes Rates to 30-Year High as Yen Weakens, Catalyzing Bitcoin Rebound
On December 19, 2025, the Bank of Japan (BOJ) raised its short-term policy rate from 0.50% to 0.75%, marking the highest rate in 30 years with a unanimous vote. This decision represents Japan’s most aggressive monetary tightening since 1995. Despite the increase, borrowing costs in Japan remain well below those of major economies. The BOJ indicated that real interest rates are expected to remain significantly negative and plans to continue raising the policy rate and adjusting monetary accommodation if economic conditions warrant.
This rate hike comes amidst Prime Minister Sanae Takaichi's $117 billion stimulus initiative, which is largely financed through increased debt issuance, with more than half of the spending funded by debt, contributing to a rising public debt level.
Following the BOJ's move, the Japanese yen weakened, prompting a rebound in Bitcoin prices. Bitcoin rose about 2.5%, climbing near $88,000 after briefly dipping below $86,000 due to yen carry-trade unwinds and then recovering above $87,000. Market analysts anticipate volatility stemming from differing global monetary policy trajectories. Notably, Tom Lee of Fundstrat projects Bitcoin could reach approximately $200,000 by late January 2026.
In parallel, Japan is pursuing regulatory changes in the cryptocurrency sector. The Financial Services Agency (FSA) has proposed new reserve requirements to cover customer losses. Digital assets are set to be regulated under the Financial Instruments and Exchange Act, introducing stricter disclosure and insider-trading rules for token listings and major issuer events. These regulatory efforts have been partly motivated by the February 2025 hack of Bybit, which resulted in losses of roughly $1.46 billion, emphasizing the need for stronger safeguards and oversight in the crypto market.
