The shift in the Bank of Japan's monetary policy is quietly rewriting the global financial landscape.

This story begins with recent data. On December 19, 2025, the Bank of Japan raised its policy interest rate from 0.50% to 0.75%, the highest level since 1995. Then, on January 6, 2026, the 10-year government bond yield soared to 2.13%, hitting a new high since 1999.

How serious is this? The once ultra-loose Japanese monetary policy has officially ushered in the era of ultra-low interest rates. BOJ Governor Ueda Kazuo stated that they will continue to monitor economic and price data, and the pace of future rate hikes will depend on market performance.

What deeper implications does this have? The key lies in the reversal of "yen carry trade." For decades, investors have been accustomed to borrowing yen at near-zero or negative interest rates, then turning around and investing this money into high-yield assets globally—US stocks, cryptocurrencies, and various emerging markets. This strategy has been very profitable.

But now, the game has changed.

As domestic interest rates in Japan rise, the cost of borrowing yen increases. These carry trade funds face margin calls and can only gradually withdraw from global markets. What’s the result? A "global pump" effect—liquidity is being systematically drained.

The cryptocurrency market feels this most directly. This market relies heavily on liquidity and is especially sensitive to global capital flows. Historical data clearly illustrates the point: after the BOJ raised rates three times in March 2024, July 2024, and January 2025, Bitcoin plummeted approximately 27%, 30%, and 30% within 4 to 6 weeks, respectively. This is no coincidence.

The reality now is—Japan’s financial earthquake is truly happening.