
The Bank of Japan’s December 19 rate hike may trigger yen carry trade unwinding and renewed Japanese bond risks, potentially affecting global liquidity conditions.
On December 19, the Bank of Japan raised its unsecured overnight call rate by 25 basis points from 0.50% to 0.75%, its highest level since 1995. Governor Kazuo Ueda stated that subsequent policy decisions will depend on economic indicators, price trends, and financial stability. Analysts warn that the shift could eventually pressure global liquidity as yen carry trades unwind and risks in Japanese bonds intensify, given the country's expansionary fiscal stance.