This week, Bank of Japan Governor Kazuo Ueda clearly stated that the central bank will comprehensively assess the pros and cons of interest rate hikes at the policy meeting in December, marking the clearest signal for a rate increase to date. In a subsequent press conference, he also pointed out that once the interest rate is raised to 0.75%, the central bank will further explain the future path of rate hikes, while the policy decisions in December will also consider wage and other economic data.

TD Securities' head of foreign exchange strategy, Jayati Bharadwaj, stated, "The Bank of Japan seems to show greater comfort with raising interest rates. We expect them to actually raise rates in December, which brings us closer to our previous judgment and boosts the yen."

According to the latest data released by Japan in November, the core inflation rate in October reached 3%, the largest increase since July of this year. The core inflation rate, excluding fresh food and energy, rose to 3.1%, up 0.1% month-on-month.

Following the release of the inflation data, concerns about fluctuations in the yen have been mounting in the market. Senior Japanese officials have repeatedly expressed their concerns about the rapid unilateral fluctuations in the exchange rate. Japanese Finance Minister Shunichi Suzuki stated that the recent yen market has experienced "unilateral and sharp" fluctuations, and intervention measures cannot be ruled out. Data shows that as of November, the USD/JPY exchange rate has risen approximately 2.19% cumulatively, with a total increase of 9.52% over the past six months.

Bank of Japan Governor Kazuo Ueda also stated in the Diet last week that the central bank needs to pay attention to the impact of a weaker yen on import costs and overall prices, suggesting that monetary policy will consider exchange rate factors. Ueda also met for the first time this week with newly appointed Prime Minister Sanae Takaichi, stating that the central bank is "gradually raising interest rates to guide inflation steadily close to the 2% target and ensure sustainable economic growth."

Takaichi has consistently favored an accommodative monetary policy. Earlier last month, she stated in the Diet that she hopes the central bank will "appropriately implement policies" to ensure that the inflation target is achieved through wage increases rather than relying on cost-push factors.

For the Bank of Japan, the current situation is somewhat of a dilemma: on one hand, inflation continues to exceed target levels, while on the other hand, GDP growth is slowing. Data shows that Japan's GDP contracted at an annualized rate of 1.8% in the third quarter, better than the market expectation of a 2.5% decline, but a stark reversal from the 1.6% growth in the second quarter. On a quarter-on-quarter basis, GDP shrank by 0.4%, also better than the expected -0.6%, while the previous quarter's growth was 0.5%.

As the last major provider of super accommodative policies globally, the tightening of Japan's financial environment has come faster and more aggressively than the market expected, impacting the already overheated risk asset sector.

On Monday (December 2), Bitcoin (BTC) experienced another wave of selling, plunging 6% at one point, falling below $85,000, marking the lowest drop since March. Ethereum (ETH) also dropped nearly 9%, hitting a low of $2,756, with a cumulative decline of 22% in November, the worst monthly performance since February this year. By Tuesday, the market had not recovered, with Bitcoin hovering around $87,000 and Ethereum floating around $2,800.

Market analysts pointed out that in this context, investors may need to reassess yen-based carry trades, arbitrage, and hedging strategies. For instance, Arthur Hayes stated on the X platform on Monday that the real trigger for this round of risk asset adjustments was the sudden shift in Japan's monetary policy. He emphasized, "The unwinding of carry trades has already begun. A stronger yen means that the fuel for this 'casino' market is diminishing."

For years, many foreign investors and institutions have engaged in yen carry trades on risk assets, borrowing yen at extremely low interest rates, converting the funds into dollars or other currencies, and then investing in high-yield, high-risk assets such as U.S. Treasuries, emerging market bonds, stocks, and cryptocurrencies for higher returns. However, with rising interest rates in Japan and the appreciation of the yen, the profit structure of this arbitrage has been disrupted: borrowing costs have increased, and the returns converted back into yen may decrease, rendering the arbitrage logic ineffective. Most of the capital that previously participated in arbitrage has begun to flow back, leading to selling pressure and deleveraging in global risk assets, including cryptocurrencies.

Meanwhile, the broader impact of interest rate hikes is a global liquidity contraction and a general rise in financing costs. As one of the world's major capital-exporting countries, Japan's rising yields often prompt domestic institutions to withdraw overseas investments and return to yen assets, thereby reducing demand for U.S. Treasuries, emerging market bonds, and risk assets. This means that for the cryptocurrency market, it is not only a withdrawal of arbitrage funds but also a systemic pressure from a tightening overall liquidity environment and a decrease in investor risk appetite.

Additionally, from an asset pricing perspective, the value of cryptocurrencies largely depends on the market's expectations for future high returns and high growth. In the context of rising global interest rates and increased discount rates, the discounting of future returns becomes more stringent, reducing the "risk premium" space for these assets and thus lowering valuations.

Related: Five-Year Increase of 120%! The Tokenization of Gold Opens a Window for Takeoff, Will Stablecoin Standards Say Goodbye to Pure Fiat?

Original article: “Japan's Monetary Policy Shift, Arbitrage Capital Exits Pressure Crypto Market”

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。