How Japan is rewriting the rules of gold and silver.
Japan's 10-year government bond yield rose to 1.98% in December 2025, the highest level since the 1990s. It comes as markets adjust for the Bank of Japan's (BOJ) policy meeting on December 19.
The move sparked a rally in precious metals, with gold and silver up 135% and 175% in early 2023, respectively. Meanwhile, bitcoin is under pressure as forced selling increases across Asian exchanges.
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Japan's bond yield reached 1.98 percent
For decades, Japan has maintained near-zero interest rates, maintaining global liquidity through yen carry trades.
Investors borrowed cheap yen to finance high-yielding assets globally, effectively exporting ultra-low interest rates.
The expected 25-basis-point hike, raising rates to 0.75%, may seem modest in absolute terms, but the speed of the change is more important than the level.
Guilherme Tavares, CEO of i3 Invest, warned: “Trading in risk: no one knows when the real consequences will come, but this continued volatility will drain liquidity from the market, which could result in margin calls and other forced transfers.”
Analysts see the BOJ's move as little more than a domestic adjustment.
“When Japanese production moves, global capital pays attention, gold and silver are not reacting to inflation, they threaten the sovereign balance. Japan is no longer on the sidelines, it is the end,” said Simon Hu-Vangasae Reeseke.
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Gold and silver prices are rising as sovereign risk increases.
Precious metals have been watching Japanese output closely. According to Global Market Investor, gold and silver are moving almost perfectly in line with Japanese government bond yields. This points to precious metals as a primary hedge against government borrowing costs.
“It's not the product, it's what the move represents – rising sovereign risk, tightening global liquidity, and uncertainty about currency credibility. Gold reacts as a hedge, and silver follows suit,” commented analyst EndGame Macro.
The silver market is showing signs of speculative mania. The China Silver Futures Fund recently traded 12 percent higher than the base metal it tracks, indicating that demand for exposure outweighs the underlying asset.
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Investors are taking gold and silver as a hedge against broader macro risks, not just inflation.
Bitcoin will face pressure as it shakes off businesses
Meanwhile, bitcoin prices are feeling the pressure of tightening yen liquidity.
“Asia-based exchanges have seen continued position selling. Miners are slowing down – forced selling, not a choice… Long Asian holders seem to be distributing… Prices remain bearish until forced supply is removed,” Cryptorus wrote.
US institutions continued to buy, with Coinbase Premium positive, but forced liquidations in Asia and an 8% drop in Bitcoin's hashrate added downward pressure.
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Past BOJ rate changes have coincided with BTC declines, and traders are closely watching for further declines to $70,000.
The opposite reactions of precious metals and bitcoin show the difference in risk positions. Gold and silver are attracting safe haven flows amid rising sovereign risk, while bitcoin faces liquidity-driven price pressure.
Analysts note that future Fed rate cuts could offset the BOJ's effects, but the pace of policy change is critical.
