At its December meeting, the Bank of Japan raised its policy rate by 25 basis points to 0.75%, in line with market expectations and marking the highest level in nearly 30 years. The BOJ stated that as long as a virtuous cycle of moderate wage and price growth is maintained, it will continue to raise rates and gradually adjust monetary accommodation—signaling that Japan’s policy normalization has entered a more continuous and sustained phase.
The policy statement highlighted a steady economic recovery, a tight labor market, strong corporate profits, and continued wage growth following the spring wage negotiations. Even after this hike, real interest rates remain deeply negative, and the BOJ emphasized that financial conditions are still accommodative. However, the policy stance has clearly shifted from “ultra-loose” toward “gradual tightening.”
For global markets, the spillover effects of the BOJ’s shift are becoming increasingly pronounced—particularly for yen-based carry trades that have long guided global capital flows. If the Federal Reserve continues easing or holds rates steady while Japan keeps hiking, the U.S.–Japan rate differential will structurally narrow. This would force a rebalancing of trades funded in yen, potentially driving capital back into Japanese assets and creating periodic pressure on the dollar and risk assets.
Bitunix Analyst View:
Looking ahead, the core driver of carry trades is no longer simply whether rates rise, but the relative pace of policy between the Fed and the BOJ. If the Fed enters a clear easing cycle while the BOJ maintains gradual hikes, global capital will adjust leverage and currency exposure more frequently. As a result, volatility in FX and crypto markets is likely to shift away from inflation data toward the speed of interest-rate convergence itself.
