Japan’s 2025 Rate Hike Gamble: Central Bank Shakes Up Global Markets
BOJ breaks from decades of ultra-loose policy—what it means for your crypto portfolio
The Yield Curve Control Exit
After years of negative rates, Japan's finally joining the tightening party. The Bank of Japan's signaling potential 2025 hikes as inflation stubbornly sticks above target. Global traders are scrambling to reposition.
Yen Carry Trade Unwind
Cheap yen funding fueled crypto rallies for years. Now that carry trade advantage evaporates—just watch leveraged positions unravel across decentralized exchanges.
Digital Asset Implications
Bitcoin doesn't care about central bank drama? Tell that to the altcoins bleeding out when liquidity gets scarce. Though honestly, watching traditional finance institutions panic about rate normalization while sitting on blockchain assets feels like front-row seats to their midlife crisis.
Japan's move proves no economy remains an island in global monetary policy—not even one that's been swimming against the tide since the 90s.
Japan’s central bank is hinting that higher interest rates could be on the horizon, showing a cautious shift.
According to a report from Reuters, Deputy Governor Shinichi Uchida told a Friday credit union meeting that the central bank will continue raising rates if economic and price trends align with its forecasts.
“We will judge without any pre-conception whether our forecasts will materialise, while scrutinising domestic and overseas economic and price developments as well as financial market moves,” he said.
Uchida emphasized that the bank is taking a careful, data-focused approach to policymaking.
His remarks follow earlier statements highlighting an improving business climate in Japan, even as U.S. tariffs continue to pressure exports.
Governor Ueda Calls for Better Decision Making
Uchida’s remarks echoed those of Governor Kazuo Ueda on Thursday. Ueda said the BoJ will carefully review multiple data points before deciding on an October rate hike. He said that it’s important to carefully watch how these changes could impact Japan’s economy, prices, and financial and foreign exchange markets.
The End of Ultra-Loose Policy
The Bank of Japan is stepping back from the era of ultra-loose monetary policy. The ultra loose policy meant keeping interest rates NEAR zero or negative and buying massive amounts of bonds and ETFs to inject liquidity into the economy.
The BoJ ended its decade-long stimulus program last year as the BoJ raised rates to 0.5% in January, aiming to cement its 2% inflation target.
Even though inflation has stayed above 2% for more than three years, Ueda has urged caution in raising borrowing costs, stressing that price growth should be supported by wage gains and strong domestic demand.
Two board members pushed for higher rates in September, sparking talk of an October hike, but those hopes eased after Sanae Takaichi’s surprise win on October 4. Analysts widely expect the BOJ to reach 0.75% by January, although timing remains uncertain.
In Q3, its balance sheet fell $148 billion to $4.62 trillion, the steepest quarterly drop since 2024. Since March 2024, assets have declined $407 billion, or 8.1%.
The Bank of Japan’s balance sheet shrinkage is accelerating:
Total assets on the BoJ balance sheet declined -$148 billion in Q3 2025, to $4.62 trillion, the lowest since mid-2022.
This marks the largest quarterly decline since Quantitative Tightening (QT) began in 2024.… pic.twitter.com/WenZuaBbIk
Even with this pullback, Japan’s central bank remains massive relative to the size of the economy as its total assets still account for over 110% of GDP. BoJ announced in late September that it WOULD start gradually offloading its ETF and REIT holdings, targeting a pace of $4.2 billion per year.
Tackling The Inflation Problem
The BoJ’s slow rate increases have kept the yen weak, raising import costs and adding to inflation pressures.
U.S. Treasury Secretary Scott Bessent said on Wednesday that the yen will settle naturally if the Bank of Japan sticks to “proper monetary policy.”
Previously, he had said that the Japanese have an inflation problem and need to raise rates to get it under control. But Ueda had argued there was no rush to hike rates, citing Core inflation still below 2%.
Rate Hike Debate Ahead of October Meeting
The IMF has also urged the Bank of Japan to keep monetary policy loose and raise rates very gradually amid global trade uncertainty.
The BoJ is scheduled to hold its next policy meeting on October 29-30, with additional meetings planned for December and January. Board member Naoki Tamura has pushed for a rate hike to address rising inflation and MOVE closer to a neutral stance, warning that delays could harm the economy.
