The Bank of Japan is widely expected to raise interest rates again before the end of the year, a move economists say could put fresh pressure on cryptocurrency markets. The tightening cycle, already underway, threatens to strengthen the yen and trigger a reversal of the popular carry trade — a strategy that has quietly supported risk-on assets including crypto.
What the economists are saying
Market consensus now points to a rate hike by December 2026, according to a survey of economists published this week. The Bank of Japan has signaled it's serious about normalizing policy after years of ultra-loose money. Another increase would follow the moves already made this year, though the exact timing remains uncertain.
How it hits crypto
The mechanism is indirect but well understood. A stronger yen makes it less attractive to borrow the currency cheaply and invest the proceeds in higher-yielding assets elsewhere — the classic carry trade. As those positions unwind, liquidity can drain from risk markets. Cryptocurrencies, still treated by most institutional investors as a risk asset, tend to feel the pinch first.
This isn't a prediction of a crash. But the timing is awkward: crypto markets have been grinding through a low-volume summer, and any sharp move in the yen could amplify existing volatility. Traders are watching USD/JPY levels closely.
The Bank of Japan's next policy meeting is in July, though most economists expect the actual hike closer to the autumn or winter. The October meeting is seen as a live candidate. Until then, the threat of a stronger yen hangs over the carry trade — and by extension, over Bitcoin and its peers. No one is ringing alarm bells yet, but the clock is ticking.
