Something is moving in Japan. And this is no small problem. This is the kind of shock that could disrupt financial markets in other parts of the world.
However, Japan, which has historically maintained low interest rates, may change its scenario by the end of 2025. The changes could cause a domino effect far beyond Tokyo.
For this reason, the financial market, including Bitcoin (BTC) and virtual currencies, carefully observe the development of events.
The first thing to note is that the last time the Bank of Japan (BoJ) raised interest rates was in January 2025. When he raised them from 0.25% to 0.50%, this was a level not seen in 17 years. Since then, the interest rate has been set at 0.50 points. ”
Interest rates have been at historic lows for 20 years, even in negative territory. The Bank of Japan now faces an even more severe scenario.
Inflation, which had been moderate for years, has begun to accelerate and is now comfortably above the central bank’s 2% target.
A key indicator is underlying inflation, which rose to 3%, the highest in more than three years, putting pressure on monetary authorities to maintain tight policy.
In this framework, the mood within the Bank of Japan is beginning to show clearer signs. Governor Kazuo Ueda declared this on Monday. We expect uncertainty surrounding U.S. tariffs to decrease.in addition to a recovery in salaries and solid corporate profits.
For him, the situation opens the door to a new monetary adjustment, further increasing expectations for rate hikes this month.
“We will make an appropriate decision as to whether to raise interest rates further,” he said. At the same time, he said, “delays in adjusting the degree of financial flexibility could cause chaos.” The decision will be known on December 19th.
the market reacts downward
Mr. Ueda’s remarks could not be ignored. As soon as they were published, the Nikkei Shimbun reacted with a nearly 2% drop. Japan’s 10-year government bond yield rises to 1.875%the highest level in the past 18 years, as seen in the following graph.
Financial markets reacted negatively to the panorama coming out of Japan. The Dow Jones Industrial Average fell 0.62% (-295.65 points) to 47,420.77 units, and the S&P 500 Index fell 0.34% (-23.22 points) to close at 6,825.87. The Nasdaq market also did not escape the correction, dropping 0.29% (-68.69 points) to 23,297.00.
The impact also extended to the digital asset market. Bitcoin fell below $90,000 due to this and other factors, including the Strategy CEO’s comments and questions about USDT’s solvency. Most of the cryptocurrencies that make up the top 100 market capitalizations were painted red.
These negative reactions include: carry trade. Financial market analyst Albert Edwards explains this phenomenon: carry trade It could cause a huge suction in US financial assets. Therefore, I think the most important thing for investors right now is to try to understand and follow the long-end rally in the Japanese market. ”
As CriptoNoticias explained, carry trade The trade, also known as the “financial bicycle,” consists of acquiring yen at a very low cost and transferring it to assets in other countries that offer higher yields. teeth A system to make profits by taking advantage of the difference in interest rates.
But what happens if that gap starts to narrow? The incentive to hold these positions will diminish, potentially leading to an exodus of capital from the U.S. and other markets. This puts downward pressure on bonds and stocks.
In that scenario, the Bank of Japan’s move could cause disruption to other parts of the global financial system.
Why do Japanese interest rates affect Bitcoin?
Bitcoin is often introduced as a type of “digital gold,” but in times of global tension, The market still treats it as a risky asset rather than a safe asset.
Therefore, in view of the tensions caused by Japan, its price was accompanied by a decline in the stock market. Meanwhile, gold is again near historic highs.
BTC was not left out either, as uncertainty caused widespread selling and many investors sought liquidity and reduced risk exposure.
However, it should also be mentioned that for those looking at prices over the medium to long term, these dips can be an opportunity to buy at lower prices.
Currency created by Satoshi Nakamoto Showing resilience and growing institutional support. This will continue to accumulate an attractive amount of time for corrections.
(Tag translation) Bitcoin (BTC)
