BoJ Signals Further Rate Hikes as Ueda Shifts From Ultra-Loose Policy

The Bank of Japan raised its benchmark rate to 0.75% in December - the highest level since 1995 - as inflation remained stubbornly above the 2% target for nearly four years. Governor Kazuo Ueda's New Year remarks confirmed a structural policy shift, stating 'we will keep raising rates in line with improvement in the economy and inflation.'

Market reactions were immediate: the yen hovered NEAR 157.15/USD (remaining weak by historical standards) while 10-year JGB yields spiked to 2.125%, a level unseen since 1999. This monetary tightening occurs against a backdrop of negative real rates, suggesting further adjustments may be needed to tame inflation.

Traders now await the January 22-23 policy meeting for confirmation of additional hikes. The move could strengthen JPY crosses, potentially cooling the recent crypto rally fueled by yen carry trades. Bitcoin and other digital assets often benefit from Japanese liquidity conditions - a dynamic that may reverse if BoJ normalization accelerates.