Japan's rate hike vs. U.S. rate cut
The Bank of Japan's hawkish shift (expected rate hike in spring 2026) has prompted the unwinding of yen carry trades, temporarily intensifying global liquidity tightening, leading to the flash crash in the crypto market on 12-02. However, the probability of a 25bp rate cut by the Federal Reserve in December is 89.2%, combined with expectations for further easing in 2026, which is positive for the rebound of risk assets in the medium to long term. BTC and ETH have rebounded over 7% and 14% from their lows.
Impact of the rate hike in Japan
On 12-01, Bank of Japan Governor Kazuo Ueda stated that if economic prices meet expectations, they will gradually raise policy rates and adjust the easing measures, making the spring 2026 labor negotiations a key observation point. This marks the end of the ultra-easy era, with the yen appreciating and the U.S.-Japan interest rate differential narrowing, forcing global carry trades that borrow yen to buy high-yield assets to unwind, directly impacting U.S. Treasury bonds, U.S. stocks, and crypto liquidity.
On a macro level: As a major holder of U.S. Treasuries, a rate hike in Japan will lead to a return of funds to the domestic market, tightening global liquidity, and putting upward pressure on long-term U.S. Treasury yields (the 10-year has fluctuated around the 4% mark). Once speculative positions in the yen turn positive, short-term panic may ease, but medium to long-term arbitrage risks remain.
Impact of the rate cut in the United States
The Federal Reserve is facing the dilemma of "deteriorating employment + sticky inflation" (November non-farm payrolls increased by only 22,000, unemployment rate at 4.3%, core PCE at 2.8%), with the market pricing in a 89.2% chance of a rate cut in December, with a cumulative cut of 50-100bp in Q1 2026 (to 3% or lower). Citigroup/Morgan Stanley have differing predictions, but under the base case, rates are expected to drop to neutral before March. CME Group
On a macro level: Short-term yields are expected to decline (the 2-year may reach 3.0-3.5%), and the yield curve is steepening (bear steepening or bull steepening), supporting risk appetite. Impact on crypto: A rate cut reduces the attractiveness of risk-free rates, which is favorable for high-beta assets like BTC and ETH. The probability of risk assets rising in the fourth quarter is high, similar to the trend of ETH before the launch of the Bitcoin ETF. Policy game: Japan's tightening is expected to suppress in the short term, but the Federal Reserve's easing will dominate in the long term. When the safe-haven attributes of U.S. Treasuries fail, the focus may shift to derivatives for hedging.
In the short term, Japan's rate hike tightening pressure is greater than the benefits of the U.S. rate cut, and the medium-term outlook is bullish, with the Federal Reserve's easing cycle dominating and ample rebound potential for risk assets.
