Japan Set to Increase Interest Rates for First Time in Nearly a Year: Potential Impact on Bitcoin

Summary: Economists predict that the Bank of Japan (BOJ) will raise its interest rates this month for the first time in almost a year. This increase is anticipated to influence Bitcoin prices, especially given the asset's reaction during the last rate hike in January.

Key Takeaways

The Bank of Japan is expected to raise its benchmark interest rate by 25 basis points to 0.75% at its upcoming meeting.
A majority of economists predict this rate hike, with some expecting rates to reach at least 1.00% by September 2026.
Bitcoin may face pressure from this rate hike, similar to past occurrences that impacted its price.
Analysts suggest that another rate increase could lead Bitcoin to dip below $80,000 before rebounding.

Japan and Bitcoin

Economists Expect Rate Hike from BOJ

Major financial news reports indicate that the Bank of Japan plans to increase its benchmark rate by 25 basis points to 0.75% during its meeting on December 18-19. This hike would resume the tightening cycle that was paused in January 2025 after rates were adjusted to 0.50%. The BOJ aims to tackle inflation, which remains above its target of 2%, as well as address the high import costs driven by a weakening yen.

Recent polling done by Reuters from December 2 to 9 shows a dramatic shift in expectations among economists. Out of 70 surveyed, 63, approximately 90%, anticipate the BOJ will lift rates to 0.75% this month, a significant increase from just 53% in the prior poll. Furthermore, 58 respondents in the same survey project that rates will reach at least 1.00% by September 2026.

A separate Bloomberg survey released on December 11 reveals unanimous expectation among 50 economists for a rate hike this month. Notably, around 81% of them attribute this increase to the yen reaching a 10-month low against the dollar, which has fueled inflation.

For context, Japan’s currency depreciation has contributed to ongoing cost-push inflation, with rates exceeding 2% for 43 consecutive months as of November 2025. Sources have suggested that the BOJ intends to confirm its commitment to raising rates after December, adapting its strategy based on upcoming economic data. Kazuhiko Sano, a strategist at Tokai Tokyo Securities, expressed his strong belief in the certainty of the December rate hike, with markets already adjusting their expectations for a final rate between 1.00% and 1.25%.

Bitcoin’s Historical Reaction to Rate Changes

Bitcoin analysts are preparing for the possible market impact as they recall how the cryptocurrency responded during the last interest rate hike. On January 23, when the BOJ last increased rates, Bitcoin was trading around $105,000, up from $89,000 just ten days earlier.

Following the rate hike, market sentiment shifted, leading Bitcoin to drop to $95,000 by February 6. After finding temporary support, the price continued to decline over the next several weeks. Late February saw more selling pressure, with Bitcoin ultimately reaching a low of $74,434 by April 7, 2025.

Bitcoin Price Drop After Japan Interest Rate Hike

To provide perspective, this decline from $105,000 to $74,434 represented a 29% decrease within approximately four months. Presently, with Bitcoin priced around $92,426, a similar fallout could potentially drive the price down to about $65,622, a level last observed in October 2024 before a notable rally followed Donald Trump’s election victory.

Analysts Forecast Potential Bitcoin Impact

Experts continue to caution that another BOJ rate hike may put downward pressure on Bitcoin prices. Earlier this month, market observer BitBull noted that BOJ rate adjustments have historically aligned with significant turning points in Bitcoin’s trajectory.

He pointed out that the March 2024 rate hike marked a peak, the July 2024 hike pushed Bitcoin under $50,000, and the January 2025 increase aligned with another high. Currently, he anticipates a decline reminiscent of the mid-2024 scenario, suggesting that Bitcoin could dip briefly below $80,000 before potentially recovering toward $100,000.

Crypto Rover echoed these sentiments by stating that a BOJ rate hike, in conjunction with a potential Federal Reserve rate cut, could narrow the interest rate differential between the U.S. and Japan. He explained that a stronger yen paired with a weaker dollar would render yen-funded positions costlier to maintain, prompting investors to unwind their holdings and sell off risk assets.

"If the Fed cuts and the BOJ hikes in December, the rate gap between the U.S. and Japan collapses. A stronger yen with a weaker dollar suddenly makes years of cheap yen-funded bets expensive to maintain, forcing investors to unwind and sell assets to repay their yen positions." — Crypto Rover (@cryptorover) December 3, 2025

He highlighted, interestingly, that the last time the yen carry trade unwound, Bitcoin hit a significant low due to tightening global liquidity. Notably, the Federal Reserve has already decreased interest rates by 25 basis points to a range of 3.50% to 3.75%.

Disclaimer: This article is for informational purposes only and should not be regarded as financial advice. The views expressed herein reflect the author's opinions and do not necessarily represent those of The Crypto Basic. Readers are advised to conduct thorough research before making investment decisions. The Crypto Basic is not responsible for any financial losses.