BOJ Hawkish Shift Signals More Rate Hikes, Raising Risks for Bitcoin and Global Markets

Bank of Japan Governor Kazuo Ueda used his first public appearance of 2026 to send a clear signal to markets: Japan’s interest rate hiking cycle is not finished. Speaking at a New Year conference hosted by the Japanese Bankers Association, Ueda emphasized that the BOJ will continue raising rates in line with improvements in economic growth and inflation, pushing back against perceptions that December’s move marked a pause.

The comments followed the BOJ’s December 19 decision to lift its benchmark rate to 0.75%, the highest level since 1995. While the hike itself was historic, markets were initially disappointed by vague forward guidance, which weakened the yen and drove it to record lows against the euro and Swiss franc. Ueda’s latest remarks appear aimed at correcting that communication misstep and restoring confidence in the BOJ’s tightening path.

Bond markets have already reacted. Japan’s 10-year government bond yield has climbed to its highest level since 1999, reflecting growing expectations of further rate increases. Analysts largely anticipate the next hike around mid-2026, though persistent yen weakness could accelerate that timeline. The currency was trading near 157 per dollar in Tokyo, close to the 160 level that previously triggered large-scale government intervention. Japanese authorities spent roughly $100 billion last summer defending the yen at similar levels.

Despite recent hikes, Japan’s real interest rate remains deeply negative. With inflation around 2.9%, the real policy rate sits near -2.15%, prompting the BOJ to acknowledge that rates are still far from neutral. This suggests an additional 100 to 175 basis points of tightening may be required. The impact is already visible, as banks face mounting bond losses and capital outflows begin to reverse, highlighted by Germany overtaking Japan as the world’s largest creditor nation for the first time in over three decades.

For Bitcoin and crypto markets, the implications are significant. Previous BOJ rate hikes have coincided with Bitcoin declines of 20% to 30%, driven by the unwinding of yen carry trades that have long fueled global risk assets. As Japanese rates rise, borrowing yen becomes less attractive, draining liquidity from equities and cryptocurrencies alike.

With the BOJ’s next policy meeting scheduled for January 23, investors and crypto traders alike should brace for heightened volatility. Japan’s monetary decisions are increasingly shaping global markets, and their ripple effects are being felt well beyond Tokyo.