The Bank of Japan is expected to raise interest rates to 0.75% on Friday, the highest interest rate in 30 years. Bitcoin is on a roller coaster and falls back to $86,000.
The market probability that the Bank of Japan will raise interest rates to 0.75% this Friday has reached 95%, which may set a record high in 30 years. After Bitcoin broke through $90,000 in the short term, it quickly fell back, and the overall cryptocurrency market fell.
(Preliminary summary: Bitcoin selling pressure is about to end? K33: Long-term holders’ shipments are coming to an end, and institutional demand will bury a turnaround in 2026)
(Background supplement: Bloomberg analysts: Bitcoin will “fall to $10,000” when the good news is gone, social media: the prophet is always wrong)
The Bank of Japan (BOJ) will announce a new policy on December 18–19 The decision will be announced after the meeting on Friday (expected on Friday afternoon). The market calculated through overnight index swaps (OIS) that the current probability of raising interest rates by 1 point (0.25 percentage points) to 0.75% is as high as 95%, which will rewrite the record for the highest policy interest rate since 1995.
Confidence to raise interest rates: Inflation and wages are rising simultaneously
This "almost a foregone conclusion" action is supported by three sets of core data.
First, core CPI has been above the 2% target for 28 consecutive months, with an annual growth rate of 3.0% in October
Second, nominal wages increased by 2.6% annually in October, better than market estimates of 2.2%, indicating that a wage and price spiral is forming
Third, the yen once weakened below 157.9, and imported inflationary pressure forced the Bank of Japan to take action. Although the impact of tariffs after U.S. President Trump took office was considered "lower than expected," the interest rate differential between Japan and the United States is converging, further supporting the decision to raise interest rates.
But even if interest rates rise to 0.75%, the Bank of Japan still seems to believe that the level is still below the "neutral interest rate" range of 1%-2.5%. Ueda Kazuo’s team hinted that this week’s action is just the beginning, and there is still room for improvement in the future.
Bitcoin skyrocketed and plummeted
Perhaps to be wary of the financial fluctuations caused by the unwinding of arbitrage trades caused by the rise in Japanese yen interest rates, Bitcoin quickly hit US$90,000 last night, and then immediately encountered a lot of selling pressure and crashed back to US$85,000. It was currently trading at US$86,137 at the time of writing.
In summary, the Bank of Japan’s action this week is not only an interest rate hike, but also a milestone for Japan to bid farewell to long-term ultra-low interest rates and move towards policy normalization. What investors need to pay attention to next is no longer whether it will rise, but where the end interest rate will stop.
According to the latest data from Coinglass, last night’s sharp shock in the past 24 hours has been shared by the entire network. 153,000 people were liquidated, and the total liquidation amount reached US$530 million.
