The Bank of Japan is making some big moves this time—the officials are already preparing for a rate hike this month. Unless there’s some unexpected trouble in the economy or financial markets, this rate hike is basically a done deal. Once it happens, the policy rate will reach a new high not seen since 1995.

According to internal sources, the central bank’s stance is: rate hikes will continue, but where the final rate lands will depend on how things develop. What does the market think? Just look at the overnight swap index—traders are pricing in about a 90% probability of a rate hike this month, which shows strong confidence.

Why is the central bank so confident? The impact of US tariffs is gradually becoming clearer, Japanese corporate profits are surging, and the likelihood of economic projections being realized is increasing. Next, the central bank may closely monitor the market’s reaction to the rate hike and explore an appropriate borrowing cost level. Current industry estimates put the neutral rate in the range of 1% to 2.5%.

At this point, some might ask: What does the Bank of Japan’s rate hike have to do with cryptocurrencies? The connection is actually significant.

There’s a strategy behind this called “yen carry trade,” which has been quietly influencing global capital flows.

Simply put, for many years, the Bank of Japan kept interest rates extremely low, even implementing negative rates. Investors spotted this “loophole” and started borrowing yen like crazy—the cost was almost zero. Then what? They’d convert those yen into dollars or other currencies, and invest them in high-yield assets: US stocks, emerging market bonds, and of course, cryptocurrencies like Bitcoin.

The core of this strategy is leveraging the “cheap” nature of the yen to gain exposure to high-risk, high-reward assets. But here’s the problem—once the Bank of Japan starts raising rates, the foundation of this strategy is shaken. The cost of borrowing yen rises, arbitrage opportunities shrink, capital flows back into the yen, and high-risk assets—including cryptocurrencies—face selling pressure.

So, the Bank of Japan’s policy shift, especially rate hike expectations or actual moves, is definitely not a minor issue for the crypto market. It directly impacts the fundamental logic of global capital flows and can trigger a chain reaction.