The Bank of Japan (BoJ) is expected to raise its short-term interest rate to 0.75% (75 basis points) during its policy meeting on December 19, 2025.
Key Details of the Historic Shift
The Decision:
The BoJ is widely anticipated to implement a 25-basis-point hike, increasing the rate from the current 0.50% to 0.75%. This would mark the highest interest rate in Japan in 30 years.
Market Probability:
As of December 17, 2025, markets have priced in a 98% probability of this hike.
Wider Strategy:
Alongside the rate increase, the BoJ reportedly plans to sell approximately $500–$550 billion in ETF holdings to further stabilize its balance sheet and exit decades of ultra-loose monetary policy.
Potential Market Impacts
Yen Carry Trade Unwinding: Higher domestic rates make Japanese bonds more attractive, potentially triggering an unwinding of the "carry trade," where investors borrow cheap yen to invest in higher-yielding global assets like US Treasuries, equities, and crypto.
Crypto Volatility: Historical data shows Bitcoin has dropped between 20% and 30% following previous BoJ rate hikes in 2024 and early 2025. Analysts warn Bitcoin could face significant selling pressure if global liquidity contracts.
Global Liquidity:
Tightening by the BoJ—long a primary source of inexpensive global leverage—may lead to forced deleveraging and increased volatility in high-beta assets and global indices.
Stay updated on the official announcement following the conclusion of the Bank of Japan's Monetary Policy Meeting on December 19, 2025.
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