The post BOJ Interest Rate Hike Expected, Raising New Risks for Global Markets appeared first on Coinpedia Fintech News

Japan is edging toward a moment it hasn’t seen in nearly three decades.

The Bank of Japan is expected to raise its policy rate to 0

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Yen Carry Trade Back In Focus

The real concern is the yen carry trade.

For years, investors borrowed cheaply in yen to invest in higher-yielding assets overseas. Higher Japanese rates make that strategy less attractive and raise the risk of capital flowing back home.

A similar BOJ move in July 2024 was followed by Japan’s second-worst one-day stock market crash, tied to fears of carry trade unwinding.

Calm for Now, But All Are Watching

Not everyone expects panic. Some fund managers point out that pension funds are slow to change allocations, and speculative yen positions are already elevated.

Still, Japan is one of the world’s largest creditors. If its capital starts returning home, global markets, including risk assets like crypto, will feel it.

For now, traders aren’t reacting to the hike itself but are watching what comes after.

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FAQs

Why is the BOJ raising rates now?

Japan is hiking because inflation has stayed above 2% for years, giving the BOJ confidence to move away from decades of ultra-low rates.

How could Japan’s rate hike impact global bond yields?

Higher JGB yields often pull up U.S. and European yields as investors rebalance, making borrowing costlier worldwide.

What happens to the yen carry trade when rates rise?

A rate jump cuts the profit from borrowing yen cheaply, raising the risk of investors unwinding positions and moving funds back to Japan.

Could the BOJ hike cause sudden yen volatility?

Yes. Even a small rate shift can trigger fast yen swings if traders expect more hikes, affecting imports, exports, and global currency flows.