The Bank of Japan’s rate hike on December 18-19 wasn’t some “US-Japan shadow war” conspiracy—this move was highly anticipated, with a 90% probability, and was basically a textbook case of monetary policy normalization.

Why do I say this? Two major reasons are obvious: domestic inflation is out of control (Tokyo’s CPI shot up to 2.0%), and internationally the yen has weakened while US Treasury yields have soared. With this dual pressure, could the central bank really sit on its hands? Rather than some “shadow war” targeting anyone, it’s more accurate to call it US-Japan policy coordination—to prevent global capital flows from causing a liquidity crisis. The yen is still hovering around 153 against the dollar, and after the rate hike, it may rebound to around 140. There’s short-term pressure on the crypto market, but the market has already priced in most of this expectation.

**Domestically: This rate hike was a well-prepared “soft landing”**

The Bank of Japan’s move was not a sudden surprise. Years of ultra-loose policy needed to be wound down, and the data backs it up:

Tokyo core CPI has been above 2% for several months, service sector inflation has surged to 3.0%, and energy and food import costs remain high. The central bank had no choice but to gradually move up from -0.1% negative rates to the current 0.75%. The yen defense has been tough—just in 2024, over 9 trillion yen was spent on market intervention, and foreign reserves are nearly depleted. At this point, what else can be done to stabilize the exchange rate except a rate hike? Politically, there’s little resistance: both the Kishida and Ishiba cabinets support normalization, and hawkish voices on Governor Ueda’s board are growing louder.

This is no “shadow war”—it’s a move forced by the data. Japanese government bond yields have surpassed 1.95%, an 18-year high, and the central bank must stabilize the yield curve.

**Internationally: US-Japan coordination is the real story, as global liquidity rebalances**

On the surface, it looks like Japan was “forced to prepare,” but really this is cross-Atlantic policy synchronization:

US Treasuries are under heavy pressure. Even with Fed rate cut expectations, the US 10-year Treasury yield is still around 4.0%. As the largest holder of US Treasuries (with $1.1 trillion), Japan has to raise rates to prevent massive capital outflows. The G7 framework already tacitly approved normalization—by the 2024 summit, there was consensus to prevent the yen from endlessly depreciating (to stop export dumping) while strengthening the US-Japan alliance in chips and security. This also puts indirect pressure on the RMB, but it’s not a targeted “shadow war”—it’s more about global monetary “rebalancing.” The ECB has already cut rates; Japan can’t remain an outlier.

Some analyst reports say the BOJ was “forced” to follow Wall Street (90% of big banks like Goldman and Morgan predicted this), but the BOJ actually acted voluntarily. The crypto tax rate will be adjusted to 20% in 2026, and the earlier rate hike also helps curb speculative capital inflows.

The so-called extreme “shadow war theory” (like the US and Japan teaming up to suppress emerging markets) simply doesn’t hold water. At its core, this is macro policy coordination: the Fed cuts rates in December, the BOJ hikes rates, forming a “US loose, Japan tight” divergence that both cushions the dollar’s dominance and stabilizes each financial system.

There might be some short-term volatility in crypto, but the rules of this game have long been written.