#BOJRateHikesBackontheTable

For decades, the Bank of Japan stood apart from every major central bank, anchoring the global financial system with an ultra-loose monetary policy defined by near-zero or negative interest rates and aggressive yield-curve control. This stance was born out of necessity, as Japan battled deflation, stagnant growth, and weak domestic demand for years while the rest of the world cycled through expansion and tightening phases. BOJ’s policy effectively became the foundation of global carry trades, supplying cheap yen liquidity that quietly fueled risk-taking across international markets.
That foundation is now showing visible cracks. Inflation in Japan has proven far more persistent than policymakers once expected, while wage negotiations have begun to reflect genuine upward pressure rather than one-off adjustments. At the same time, prolonged yen weakness has increased imported inflation and raised political and economic concerns about currency stability. Together, these forces have revived serious discussions around rate hikes and policy normalization, shifting BOJ rhetoric from “temporary inflation” toward structural change.
The implications of this shift extend far beyond Japan’s borders. A move toward higher rates would likely strengthen the yen, unwind long-standing carry trades, and push Japanese bond yields higher, forcing global investors to rebalance portfolios. Liquidity that once flowed freely into equities, emerging markets, and speculative assets could tighten at the margins. For risk assets such as stocks and crypto, this represents a subtle but meaningful macro headwind, as one of the last sources of ultra-cheap capital begins to retreat.
Looking forward, this moment matters because it signals a broader transition in the global monetary regime. If the BOJ long viewed as the most patient and accommodative central bank begins to normalize policy, it reinforces the idea that the era of synchronized easy money is ending. Markets that thrived on excess liquidity will need to adapt to a world where capital is more selective, volatility is less suppressed, and macro policy divergence becomes a defining driver of price action worldwide.