• Event: Bank of Japan plans rate hike to 0.75% on Dec 18-19
• Benchmark Level: Highest policy rate since 1995
• Impact on Crypto: Bitcoin drops below 85 000, $637M liquidations
• Other Assets: JGB yields rise, UST yields jump, crypto stocks slide
• Stablecoin Growth: Japan’s yen stablecoin sector enters sovereign debt role
• Macro Trend: Tightening liquidity, risk off sentiment

Bank of Japan Rate Hike Impact Hits Bitcoin As Crypto Markets Reel

The Bank of Japan (BOJ) is preparing to raise its policy interest rate to 0.75 percent at its December 18-19 meeting, pushing borrowing costs to their highest level in nearly three decades. The anticipated decision the first rate increase since January 2025 is rippling through financial markets, contributing to renewed pressure on risk assets including Bitcoin, which recently dipped below 85 000.

The move reflects a broader shift in Japan’s monetary stance as the central bank confronts rising bond yields and evolving macro conditions within a landscape of tightening liquidity worldwide.

BOJ Tightening A September to Remember

Nikkei reports indicate that Governor Kazuo Ueda and his executive team are ready to submit a formal rate-hike proposal. A majority of the nine-member Policy Board is expected to approve a 25 basis-point increase from the current 0.50 percent level.

The decision comes as:

• Japan’s 10-year government bond yields climbed to 1.94 percent near levels not seen since mid-2007.
• Tokyo’s government under Prime Minister Sanae Takaichi signals growing support for monetary tightening.

The spike in yields reflects shifting market expectations, tightening liquidity conditions globally, and cross-asset influences from major central bank moves elsewhere.

Crypto Markets Reel as Policy Shift Dampens Risk Appetite

Bitcoin’s recent price action shows how sensitive the crypto market has become to macroeconomic shifts. After a sharp 5 percent single-session drop, BTC briefly slipped below 85 000, triggering more than 637 million in long liquidations across crypto futures markets.

This cascade in positions contributed to risk-off sentiment in digital assets, mirrored by movements in traditional markets.

The Crypto Fear and Greed Index plunged toward “extreme fear” territory near 20, indicating heightened bearish sentiment among traders and investors as investors reduced leverage and de-risked exposure ahead of the BOJ decision.

According to Ignacio Aguirre, CMO at Bitget, a stronger yen and rising bond yields can prompt the unwinding of yen carry trades a strategy that traditionally funds risk assets via low-cost yen borrowing. As those positions reset, correlated assets like Bitcoin may face temporary downward pressure.

Spillovers: Bonds, Stocks and Yield Curves

The impact of Japan’s policy shift extends beyond local markets. Rising yields on Japanese government bonds have contributed to higher yields abroad — including the 10-year U.S. Treasury near 4.08 percent as funding conditions tighten globally.

Technology stocks, high-growth equities, and crypto-exposed names felt the pressure. Notable equity reactions included:

• MicroStrategy shares sliding sharply
• Coinbase and Robinhood giving up mid-single-digit ground

These moves highlight the interconnected nature of macro factors, risk sentiment, and digital asset performance.

Stablecoins and Sovereign Debt Dynamics in Japan

Amid tightening monetary policy, Japan’s emerging stablecoin ecosystem has gained attention for its potential to reshuffle demand in the sovereign debt market.

JPYC, Tokyo’s first yen-pegged stablecoin launched in October under the revised Payment Services Act, has set ambitious targets, including 10 trillion yen in circulation over three years. Its investment strategy allocating 80 percent in Japanese government bonds and 20 percent in bank deposits could play a role in stabilizing demand as the BOJ reduces its own bond purchases.

Meanwhile, Japan’s Financial Services Agency is backing a pilot project among the nation’s biggest banks to build a shared framework for issuing yen backed stablecoins, initially targeting corporate payment flows.

Regulatory and Tax Reform Signals Maturing Crypto Markets

Japan is moving toward a broader regulatory and taxation overhaul including a flat 20 percent tax on crypto trading gains in 2026 that replaces a top marginal rate that once reached 55 percent. The reforms aim to align digital asset profits with those from stocks and other investment products, boosting institutional interest.

At the same time, the country’s largest traditional financial firms are preparing for increased participation in digital asset products:

• Nomura Asset Management formed a cross division task force on crypto products
• Daiwa Asset Management is exploring strategies with global ETF specialist partners

Tokyo Stock Exchange operator Japan Exchange Group is also considering stricter rules for companies entering crypto markets, signaling a maturation in investor protection priorities.

Regulators including the FSA plan to require crypto exchanges to hold dedicated liability reserves against customer losses building on lessons from major hacks, such as the DMM Bitcoin theft in May 2024.

Looking Ahead: BTC, ETH and Macro Crosswinds

Despite near-term volatility tied to BOJ action, some analysts see potential for digital assets to rebound in 2026. According to Aguirre:

• Bitcoin could retest the $95 000 to $100 000 range
• Ethereum might climb toward $3 800
  …as institutional capital returns and macro conditions stabilize.

Conclusion

The Bank of Japan’s anticipated rate hike to its highest level since 1995 is reshaping both local fixed income and global risk markets. For crypto, the tightening narrative has translated into price pressure, liquidations, and reduced appetite for leveraged positions.

At the same time, Japan’s evolving stablecoin ecosystem, regulatory reforms, and institutional movements suggest that the country’s digital asset landscape is maturing even as macro shocks test resilience.