The Bank of Japan keeps interest rates unchanged, and this is the reason for the market correction in the past two days. Previously, the market generally expected the Bank of Japan to raise interest rates, but based on the statements from the Bank of Japan's officials today, there is a possibility of a rate hike in June.

The yen is actually an important provider of global dollar liquidity. Many funds borrow yen at low interest rates and then exchange them for dollars to invest in higher-yield markets. This is a typical carry trade. But if Japan raises interest rates, these arbitrage positions will be forced to close, and liquidity will be rapidly drained.

Many people may not realize the importance of Japanese interest rates in their daily lives, thinking that global liquidity mainly depends on the Federal Reserve. However, Japan's ultra-low interest rates are actually one of the "water taps" for global funds. Once rates are raised, the tap is turned down, and global markets will follow suit.

On March 19, 2024, the Bank of Japan raised interest rates, causing the U.S. stock and crypto bull markets to abruptly stop. On July 31, 2024, the Bank of Japan raised rates again, and Bitcoin fell from $62k to $49k. On December 2025, the Bank of Japan raised rates once more, and Bitcoin dropped from $116k to $80k. Therefore, closely monitor the Bank of Japan's actions in June.