Karla Barker 
Japan’s monetary policy shift affects global risk markets
Japan’s move toward higher interest rates is starting to ripple through global markets, and Bitcoin seems to be feeling the effects. After three decades of ultra-low funding costs, investors are preparing for what might be a significant change in how money moves around the world.
The Bank of Japan is expected to raise its benchmark rate to 0.75% at the December policy meeting. That would be the highest level since 1995. The mere possibility of this change has already strengthened the yen, which moved from above 155 per dollar to roughly 154.56 on Friday.
Policy makers appear inclined to increase by 25 basis points at the December 19 meeting, according to those involved in the discussions. They’ll proceed unless something major disrupts global or domestic markets. Governor Kazuo Ueda said the board would make an appropriate decision, using similar wording to previous increases. Market data suggests the likelihood of a December move is nearly 90%.
The yen carry trade and Bitcoin’s sensitivity
This matters because the cost of funding increases, which directly impacts what’s known as the yen carry trade. For years, hedge funds and proprietary desks have borrowed cheaply in yen and invested those funds in more volatile assets. Bitcoin has been one of the markets most sensitive to changes in leverage and liquidity.
As borrowing costs rise, investors are repositioning themselves. The strengthening yen aligns with what seems to be a de-risking of macro portfolios. This could constrain the liquidity environment that helped Bitcoin recover from recent lows.
We saw this tension earlier in the week when Bitcoin fell to around $86,000 before rising to about $89,000, moving somewhat in tandem with U.S. equities. Its price movements have been tied to fluctuating global rate expectations during what’s been a tumultuous month for macro-linked assets.
Japan’s cryptocurrency tax changes
This policy shift coincides with Japan’s planned redesign of its cryptocurrency tax regime. Starting in 2026, the country plans to shift to a flat tax of 20% on trading gains. The tax would be equivalent to those levied on equities and investment trusts, treating crypto like any other financial instrument.
Currently, digital asset income faces a progressive tax structure that can exceed 55%. Critics argue this structure doesn’t promote sales because it creates the risk of large tax liabilities. Reform advocates believe the reduced, unified rate will spur involvement in Japan’s crypto market, which saw about eight million active accounts and roughly 1.5 trillion yen ($9.6 billion) in spot exchange volume in September.
Financial institutions adapt to new landscape
Japanese asset managers are already adjusting to these regulatory changes. Nomura Asset Management has established an internal task force to assess product strategies. Daiwa Asset Management is collaborating with Global X Japan to explore potential offerings.
Mitsubishi UFJ Asset Management and Amova Asset Management are renegotiating their custody, pricing, and standards protocols. They’re preparing to support more digital-asset exposure for both retail and institutional investors.
What’s interesting, I think, is how these two policy changes—monetary and tax—are converging. The rate hike affects leverage and borrowing costs, while the tax reform aims to normalize crypto as an asset class. Both could reshape how Japanese investors approach digital assets.
It’s not entirely clear how this will play out. Higher borrowing costs might reduce speculative activity, but a more favorable tax structure could encourage longer-term investment. Perhaps we’ll see a shift from short-term trading to more strategic positioning.
The political backing for these changes appears solid, with government ministers aligned with Prime Minister Sanae Takaichi supporting the tightening agenda. This suggests Japan is serious about normalizing both its monetary policy and its approach to digital assets.
For Bitcoin specifically, the immediate pressure seems to come from the changing leverage environment. But longer term, Japan’s regulatory clarity might actually be beneficial. It’s one of those situations where short-term pain could lead to more sustainable growth.