The Bank of Japan (BOJ) will announce its policy decision after its meeting on December 18-19 (expected Friday afternoon). According to calculations by the market through overnight index swaps (OIS), the probability of raising interest rates by 25 basis points (0.25 percentage points) to 0.75% is as high as 95%, which would rewrite the record for the highest policy rate since 1995.
The confidence to raise interest rates: Inflation and wages are rising in tandem.
This move, which is "almost a done deal," is backed 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 rose 2.6% year-on-year in October, better than the market expectation of 2.2%, indicating that a wage-price spiral is forming.
Third, the yen had depreciated below 157.9, and imported inflation pressures forced the Bank of Japan to take action. Although the impact of tariffs imposed after US President Trump took office was considered "less than expected," the narrowing interest rate differential between Japan and the US further supported the decision to raise interest rates.
Even with interest rates rising to 0.75%, the Bank of Japan seems to still consider the level below the "neutral interest rate" range of 1%–2.5%. Kazuo Ueda's team hinted that this week's actions are just the beginning, and there is still room for further increases.
Bitcoin price surges and crashes
Perhaps due to concerns about potential volatility caused by the unwinding of arbitrage positions following the yen's interest rate hike, Bitcoin surged to $90,000 last night before immediately encountering heavy selling pressure and plummeting back to $85,000. As of press time, it is trading at $86,137.
In summary, the Bank of Japan's actions this week were not merely a rate hike, but a milestone marking Japan's departure from a prolonged period of ultra-low interest rates and its move towards policy normalization. Investors should now focus not on whether rates will rise again, but rather on where the final interest rate will ultimately stand.
According to the latest data from Coinglass, the sharp fluctuations last night resulted in 153,000 people being liquidated across the network in the past 24 hours, with a total liquidation amount of $530 million.
