Bank of Japan Set to Hike Rates to 30-Year High, Posing Another Threat to Bitcoin
The Bank of Japan (BoJ) is expected to raise its policy rate by 25 basis points to 0.75% on December 19, 2025, marking the highest level in about 30 years, according to Nikkei. This rate hike could increase Japanese funding costs and, combined with falling U.S. rates, might force leveraged funds to unwind carry trades, potentially putting pressure on Bitcoin and broader crypto markets.
Historically, BoJ rate hikes have been bearish for Bitcoin. A stronger yen has tended to coincide with Bitcoin downside, while a weaker yen has supported higher prices. Currently, the yen stands around 156 per U.S. dollar, near the late November peak above 157. This movement affects yen carry trades and could impact Bitcoin indirectly via the equities channel.
Carry trades funded by ultra-low or negative yen rates could reverse if rates rise, reducing money flow into higher-beta assets and prompting broad risk aversion in stocks and crypto. The last BoJ hike on July 31, 2024, lifted rates to 0.5% and coincided with a yen rally and risk-off sentiment that saw Bitcoin fall from about $65,000 to $50,000.
Meanwhile, the U.S. Federal Reserve recently cut rates by 25 basis points to a three-year low and introduced liquidity measures. This caused the dollar index to drop to a seven-week low, which suggests lower odds of a pronounced yen carry unwind at this time.
Japan’s debt-to-GDP ratio remains high at around 240%, contributing to potential future volatility. MacroHive commentary has questioned BoJ's credibility amid this elevated debt and rising inflation expectations.
