BOJ to Hike Interest Rates as US Fed Cuts: Crypto Market on Edge
In a dramatic turn of events, the Bank of Japan (BOJ) is gearing up to raise interest rates, defying expectations of the crypto market. The move is seen as a response to rising inflation and a weakening yen, marking the first hike since January 2025.
Significantly, this development comes hot on the heels of the US Federal Reserve’s interest rate cut, which has left investors and market enthusiasts confused about the crypto market’s potential movements. While the Fed’s policy easing has sparked widespread optimism and a renewed positive sentiment, the BOJ’s decision could be a catalyst for wild volatility.
Bank of Japan Rate Hike Looms: Is Crypto Market Poised to See Another Crash?
Amid growing speculations and discussions, the Bank of Japan has hinted at its decision to raise interest rates by 25 basis points. According to the latest reports, the central bank has decided to tighten its policy by increasing the rates to 0.75% at its December 18-19 meeting.
The government, led by Prime Minister Sanae Takaichi, is likely to support this decision, considering the risks of inflation and a weak yen. Economists predict that the BOJ will raise borrowing costs to at least 1% by the end of September next year.
It is noteworthy that the policy rate has not been greater than 0.5% since September 1995. This means that if the bank hikes its rate during the next meeting, it will reach a level not seen in 30 years.
A recent Reuters poll shows 90% of economists expect the Bank of Japan to increase interest rates to 0.75% from 0.50%. This is a significant jump from the previous poll, where only 53% expected a rate hike.
Fed Rate Cut Sparks Crypto Market Rally: What’s Next?
The Federal Reserve has loosened its monetary policy at the end of the two-day meeting on Wednesday, lowering its interest rate by 25 basis points to 3.50%-3.75%. This marks the third rate cut of the year.
Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid wanted to keep the rates steady, while Fed governor Stephen Miran pushed for a bigger 50 basis point cut. The split decision reflects the Fed’s cautious approach to balancing inflation and other concerns.
Notably, Fed Chair Jerome Powell highlighted the “challenging” position the Fed is currently in. This challenge arises from balancing the dual mandate, amidst speculation about new leadership.
This event has had a significant impact on the crypto market, with top cryptocurrencies like Bitcoin exhibiting bullish signals. The global crypto market has rebounded to $3.14 trillion, marking an impressive surge of 2.25%. BTC has surged past the $93k level, sparking immense enthusiasm.
🇺🇸 The US Fed made three strategic cuts over the past 3 months, resulting in a total of an 0.75% reduction to interest rates.
1⃣ September 17, 2025: Fed lowered the target range to 4.00 %–4.25 % (from 4.25 %+) at the 16–17 Sep meeting.
2⃣ October 29, 2025: Fed cut the rate to… pic.twitter.com/X6DWypvq5t
— Santiment (@santimentfeed) December 11, 2025
According to the market intelligence platform Santiment, these three Fed rate cuts have triggered a “buy the rumour, sell the news” reaction in Bitcoin and crypto markets, with short-term pullbacks followed by rebounds once volatility subsides. The platform states that the latest Fed rate cut has also triggered a mild sell-off signal, hinting at a post-announcement decline.
If the BOJ raises the rate, it could strengthen the yen, making it more expensive for investors to borrow and invest in riskier assets like cryptocurrencies. This could lead to a major sell-off, potentially causing another crypto market crash.
