The Bank of Japan raised interest rates to 0.75% on December 19, marking the highest borrowing costs in three decades and triggering immediate speculation about implications for global crypto markets.
Bitcoin climbed 2.5% to approach $88,000 following the decision, which came as policymakers balanced inflation concerns against mounting fiscal pressures from Prime Minister Sanae Takaichi’s $117 billion stimulus package.
Governor Kazuo Ueda emphasized the bank would “continue to raise the policy interest rate and adjust the degree of monetary accommodation” if the economic outlook materializes as projected.
The central bank voted unanimously to lift short-term rates from 0.5%, stating that “real interest rates are expected to remain significantly negative,” and that “accommodative financial conditions will continue to firmly support economic activity.“
The decision arrives as Takaichi’s government pushes through expansive fiscal policies funded largely by issuing more bonds. Speaking to The New York Times, George Goncalves, head strategist at MUFG, noted the “volatile mix of growing debt, higher interest rates, aggressive fiscal spending and tariffs make the path forward for Japan’s economy difficult to predict.”
The rate increase represents Japan’s most aggressive monetary tightening since 1995, though borrowing costs remain far below those in other major economies.
Christopher Wong, currency strategist at OCBC, speaking with Reuters, added that “the yen initially strengthened but quickly surrendered those gains, in part reflecting thin market liquidity that amplified short-term price action rather than a reassessment of fundamentals.“
Market reactions were mixed, with the yen initially strengthening before giving up those gains as investors digested the statement’s implications.
