Yen trend forecast reveals global risks: How BOJ rate hikes impact Bitcoin and the crypto market

This week’s Bank of Japan interest rate decision will become the anchor for global capital markets. As the yen’s trend forecast points toward a high probability of rate hikes, this not only concerns Japan’s domestic economy but also, through complex global capital flows, directly impacts risk assets like Bitcoin. According to the Polymarket prediction platform, the market believes there is a 97% chance that the BOJ will raise interest rates, with only 3% of traders betting on rates remaining unchanged. Currently, Bitcoin is priced at $90.16K, up 2.33% in 24 hours, but this cannot hide the market’s deep concern over the subsequent reactions to the rate hike.

Cryptocurrency analysts and macroeconomists agree: this round of rate hikes will cause a structural shift in global liquidity. If the hike materializes, Japan’s policy rate will reach 0.75%, the highest in nearly 20 years. Behind this seemingly moderate increase lies a hidden end to the era of “cheap financing.”

End of the Cheap Financing Era: The Chain Reaction of Yen Arbitrage Trades

For decades, the global financial system has been built on a simple yet fragile logic: borrow yen at ultra-low interest rates and then invest globally in stocks, bonds, and cryptocurrencies. This “yen arbitrage trade” party is now facing a potential shutdown.

Analyst Mister Crypto bluntly states: “For decades, the yen has been the preferred currency for borrowing and converting into other assets, but as Japanese bond yields rise rapidly, this arbitrage is shrinking.” As borrowing costs continue to climb, positions built with yen leverage will be forced to close. Investors will have to sell risk assets to repay debts—triggering a painful capital outflow process.

For institutional investors relying on the yen as a “cheap funding machine,” the projected rate hike path is akin to an earthquake. This will trigger a wave of unwinding in arbitrage trades, with spillover effects far beyond Japan.

Historical Inertia: Bitcoin Declines in Past Rate Hike Cycles

Historical data provides strong support for market anxiety. According to trader backtests:

• After the March 2024 BOJ rate hike: Bitcoin dropped about 23%
• After the July 2024 BOJ rate hike: Bitcoin dropped about 25%
• After the January 2025 BOJ rate hike: Bitcoin dropped over 30%

These declines reflect the same mechanism: when Japanese liquidity contracts, global risk assets face indiscriminate sell-offs. Analyst 0xNobler issued a stern warning: “Every time Japan hikes rates, Bitcoin crashes 20%–25%. If the BOJ raises rates to 75 basis points, based on this historical pattern, Bitcoin could face a retest of $70,000 by the end of the year.”

The current price of $90.16K indeed leaves room for downside compared to these historical levels. The market generally considers a “retouch of $70,000” as a short-term risk scenario, making it an important support level next week.

Diverging Paths in the Liquidity Shift: Short-term Risks vs. Long-term Opportunities

However, not all market observers see the BOJ rate hike as necessarily bearish. Another camp presents a different logic.

Macro analyst Quantum Ascend believes this is not merely a liquidity contraction but a “systemic shift.” If Japan hikes rates while the Federal Reserve begins a rate-cut cycle, it could create new capital rotation opportunities. According to his analysis: Fed rate cuts will inject dollar liquidity and weaken the dollar’s strength, while the BOJ’s moderate rate hikes will only support the yen without substantially destroying global liquidity. Capital will rotate into risk assets with asymmetric upside potential—and this is precisely the “sweet spot” for cryptocurrencies.

Analyst The Great Martis emphasizes the market’s short-term fragility. He points out that the bond market is already forcing the BOJ to act, with signals of “head expansion” in stock indices, and global yields rising in tandem, indicating mounting pressure. Before the year-end holidays, liquidity is already low, investor confidence is weak, and the projected rate hikes will likely cause market turbulence.

Short-term Volatility Is Inevitable, Long-term Direction Remains Unclear

Since December, Bitcoin has been trading flat and directionless. Analyst Daan Crypto Trades notes that the low liquidity environment at year-end will amplify any policy shocks’ volatility.

Whether the BOJ’s rate hike triggers another sharp correction or lays the groundwork for a rebound after volatility, the key may not be “whether” there is a rate hike but how global liquidity responds in the coming weeks. The yen’s trend forecast and BOJ decision will become the most influential economic catalysts in early 2026. Market volatility is unavoidable, and investors’ positioning and psychological resilience will directly determine who survives this liquidity cleansing.