Polymarket Bettors Are 97% Certain: Bank of Japan Set for December Rate Hike – Implications for Crypto and Risk Assets

Image Source: Polymarket via @MerlijnTrader on X

As the Bank of Japan's (BOJ) December monetary policy meeting approaches on December 18-19, 2025, prediction markets are sending a clear signal: a 25 basis point interest rate hike is almost a done deal.

Popular decentralized prediction platform Polymarket currently prices the probability of a 25 bps increase at around 97%, with "No change" at just 3% and more aggressive moves (50+ bps) at less than 1%. This represents a dramatic shift from earlier in the month, when odds were far more balanced, to near-certainty following recent economic data and BOJ communications.

Why Is the Market So Confident?

The BOJ has been on a gradual normalization path after decades of ultra-loose policy, including negative interest rates. The current policy rate stands at 0.5% – the highest since 2008 – following earlier hikes in 2024 and 2025.

Multiple sources, including Reuters and Bloomberg reports from the past week, indicate the central bank is poised to raise rates to 0.75%. Key drivers include:

• Persistent weakness in the Japanese yen, which has fueled imported inflation.
• Improving wage growth and business sentiment (recent Tankan survey hit a 4-year high).
• Receding risks from U.S. trade policies under the current administration.
• Governor Kazuo Ueda's recent comments weighing the "pros and cons" of a hike, widely interpreted as preparatory signaling.

Economists surveyed by Reuters overwhelmingly expect the December hike, followed potentially by further increases to 1.0% by September 2026.

The Bigger Picture: Carry Trade Unwind and Global Liquidity

As trader @MerlijnTrader highlighted in a widely viewed post:

"When Japan moves, funding markets feel it. Carry trades unwind. Liquidity tightens. Historically, BOJ tightening has never been friendly for global risk."

The famous "yen carry trade" – borrowing cheaply in yen to invest in higher-yielding assets worldwide – has been a major source of global liquidity for years. Higher Japanese rates make this strategy less attractive, potentially forcing unwinds that reduce liquidity in stocks, bonds, and cryptocurrencies.

Past BOJ tightening episodes (even modest ones) have coincided with volatility spikes in global markets. While some argue this hike is already "priced in," the rapid swing in Polymarket odds suggests fresh money has flowed in recently on the hawkish side.

What This Means for Crypto

Bitcoin and altcoins have enjoyed a strong 2025 so far, with BTC consolidating around all-time highs. However, a confirmed BOJ hike could introduce short-term headwinds:

• Stronger yen → Reduced carry trade flows → Tighter global funding conditions.
• Risk-off sentiment could pressure leveraged positions in crypto markets.
• Some analysts warn of potential dips toward lower supports if the BOJ signals an aggressive 2026 path.

That said, if the hike comes as expected without major surprises, markets may quickly shrug it off and refocus on other catalysts (Fed policy, ETF flows, etc.).

Final Thoughts

With the decision just days away (expected announcement around December 19), this is a high-conviction event worth watching. Prediction markets like Polymarket have proven remarkably accurate on macroeconomic outcomes, and the current 97%+ probability reflects broad consensus.

Traders and investors in risk assets – especially crypto – should stay vigilant for volatility around the announcement. Whether this marks the start of a broader liquidity squeeze or just another step in Japan's normalization remains to be seen.

What do you think – will the BOJ deliver the expected hike, and how will markets react? Drop your thoughts in the comments!

Sources: Polymarket, Reuters, Bloomberg, BOJ official schedule
Tags: #boj #interestrates #polymarket #crypto #bitcoin #yen #carrytrade #macro #economy #finance

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