The Bank of Japan signals a hawkish shift; this time, they might really go all in

Recent news has caused some concern—the Bank of Japan hints that this rate hike cycle isn't over yet, and the final interest rate could surpass 0.75%. When global markets hear this, they immediately become nervous. In short, Japan is still on the path of raising rates, and even they are uncertain about how high it will go. For those in the crypto space, this is a tangible macro shockwave.

Why is this so important? Because Japan has long been the origin of global arbitrage trading, with low-interest yen borrowed for financing around the world, leveraging global assets. Now, with the rate hike cycle extending, the cost of borrowing in yen will steadily increase. Once Japanese yields become attractive, large amounts of international capital could flow back into Japan, effectively draining liquidity from the market.

And looking at the background—The Federal Reserve has remained on hold, the European Central Bank is watching the excitement, and now the BOJ suddenly turns hawkish, which is essentially a warning to the market: the era of cheap money globally is truly over. As a result, markets will long-term expect higher funding costs and tighter liquidity, putting real pressure on high-risk assets like cryptocurrencies.

But there's another complication—Japan’s own central bank hasn't even pinpointed where the neutral interest rate is. The policy path is full of uncertainty, leading markets to speculate and re-price repeatedly. Periodic risk-avoidance sentiments will frequently emerge, directly increasing volatility in global assets including Bitcoin and Ethereum.

How does the BOJ exert pressure? Mainly through three channels: USD/JPY exchange rate, global liquidity expectations, and overall market risk appetite. If we add that US economic data continues to improve, and the major central banks of the US, Europe, and Asia start tightening simultaneously, the market suppression will be even more intense.

How to respond? Keep an eye on the US dollar index and USD/JPY exchange rate—they act like thermometers for capital flow. During periods of thin liquidity, avoid high leverage, as a single statement from the central bank can cause flash crashes. And most importantly—under the macro tightening story, cash is also a position. Maintaining sufficient liquidity will help you seize opportunities when the next wave arrives.

This isn't a sign that the bull market is ending, but it is a severe test of your holdings capacity and risk management discipline.