JAPAN IS THE CENTER OF ATTENTION THIS WEEK
Japan has quietly become the most important macro storyline of the week, and markets are watching closely.
On December 19, the Bank of Japan is widely expected to raise interest rates by 25 basis points. According to Polymarket, the probability sits near 98%, meaning traders are almost fully aligned on the outcome. If confirmed, Japan’s policy rate would move to 0.75%, a level the country hasn’t seen since 1995.
This matters far beyond Japan.
Historically, the last three BoJ rate hikes were followed by Bitcoin drawdowns of more than 30%. That history alone is enough to make risk traders cautious — but the reasons behind it are even more important.
First, a rate hike tightens global financial conditions. Japan has been the backbone of cheap capital for decades, and even small policy shifts can ripple through global liquidity.
Second, higher Japanese rates accelerate the unwinding of the yen carry trade. When borrowing yen stops being cheap, leveraged positions across global markets are forced to adjust — sometimes quickly.
So does this mean Bitcoin is headed for another sharp drop?
Probably not this time. The key difference is pricing. This hike has been telegraphed for weeks and is largely baked into expectations. Unless the BoJ surprises with aggressive guidance, the shock factor may be limited.
As always, markets don’t move on events — they move on surprises.
Now the real question is not if Japan hikes, but what comes next.
