The Bank of Japan Governor Kazuo Ueda recently signaled a clear hawkish stance. Following last week’s rate hike to 0.75% (the highest since 1995), he further hinted that there will be more rate increases next year. This marks Japan’s official departure from the long-standing era of ultra-loose monetary policy.

Why are they so determined? Several factors are stacking up: wages and prices are already spiraling upward, the 2% inflation target is getting closer, real interest rates remain low, and the yen is under depreciation pressure. As a result, the resolve to tighten policy is much stronger than before.

Market consensus is that Japan will enter a "rate hike every six months" cycle, which could last for three and a half years. Persistent high inflation provides political support for continued rate hikes, and the yen’s exchange rate has been pushed higher as well. But the impact of this shift extends far beyond Japan— it will reshape the flow of global capital, potentially triggering leverage liquidations and a large influx of funds back into Japan.

History shows that whenever the Bank of Japan enters a tightening cycle, the crypto market typically experiences a 20%-30% sell-off. However, the market has already priced in many rate hike expectations, and no aggressive selling pressure has been seen in the short term. Still, the long-term effects of gradually tightening global liquidity are worth watching.