Bank of Japan Is About to Change the Game
Markets are now leaning toward a 25 bps rate hike at the Dec 18–19 BoJ meeting, which would push Japan’s policy rate to 0.75%.
If that happens, this isn’t just another macro headline — it’s a structural shift that markets can’t ignore.
Why this move actually matters
This would mark Japan’s first rate hike in nearly a year and take interest rates to levels not seen in roughly three decades. More importantly, it signals a clear step away from the ultra-loose monetary era that defined Japan for years. Cheap money has been Japan’s export to the world — and that era is starting to fade.
Why the BoJ is under pressure
Inflation in Japan isn’t fading the way policymakers once hoped. Core CPI is sitting close to 3%, well above the official target. Wage growth is also holding up, suggesting inflation isn’t just a temporary spike. Add persistent yen weakness, rising import costs, and political pressure — and suddenly the BoJ doesn’t have the luxury of waiting.
Why global markets should care
Japan has been the lowest-cost liquidity provider for global markets. If rates rise:
• The yen strengthens
• Carry trades unwind
• Global liquidity tightens
And when liquidity tightens, everything feels it — FX, bonds, equities, and crypto included. Risk assets don’t move in isolation when a major funding currency changes direction.
This isn’t a Japan-only story. It’s the kind of macro shift that sends shockwaves across markets.
Volatility isn’t coming — it’s already lining up.
