The Night Before Japan's Rate Hike: An Underestimated Storm Is Approaching
Tomorrow, the Bank of Japan will announce its latest interest rate decision. The market widely expects that the probability of a rate hike has risen to 80%–90%, with the benchmark rate potentially increasing from 0.5% to 0.75%, reaching its highest level in nearly thirty years. This is not an ordinary meeting; it could be one of the most critical turning points in the global financial market this year, with impacts that may rival or even exceed those of the Federal Reserve's rate cuts.
Japan's long-standing zero interest rates have provided the world with the cheapest source of funding and have given rise to “yen carry trades” amounting to trillions of dollars. Funds are borrowed in yen and flow into U.S. Treasuries, stock markets, and crypto assets, becoming an important invisible engine of risk markets. Once the rate hike is confirmed, financing costs will surge, arbitrage opportunities will be quickly compressed, and liquidations and capital returns will be inevitable, often hitting high-volatility, high-leverage assets first.
History has repeatedly issued warnings. Whether on the eve of the 2000 internet bubble or during the 2006–2007 global crisis buildup, Japan's policy shifts have often coincided closely with global liquidity turning points. The severe pullback in the crypto market triggered by the rate hike in 2024 is still fresh in memory.
For the crypto market, the risks do not only stem from the rate hike itself but also from structural vulnerabilities: high leverage, tight emotions, and overly unified consensus. Once prices break below key support levels, liquidations can be quickly amplified, creating a chain reaction. In the short term, $BTC $ETH may face severe volatility.
However, after the storm, there may not be only ruins. History also shows that Japan's rate hikes often lead to a path of “short pain and long stability.” When panic is released and leverage is cleared, true long-term capital will re-enter the market. The winds are changing, speculative vessels need to seek shelter, while patient investors may be waiting for a better opportunity to board.
