Déjà Vu
Imagine the last quarter of 1999: tech stocks are soaring in the US, the Nasdaq is booming, risk appetite is at its peak. At the same time, Japan is sending small but critical signals about its long-suppressed monetary policy. Perhaps not an interest rate hike, but a message that “this cannot go on forever.”
Today, looking ahead to 2024–2025, the scene is familiar. On the US side, the interest rate cut cycle has partially begun and continues to be debated. On the Japanese front, BOJ Governor Kazuo Ueda, following the policy rate hike to 0.75%, is putting up a signpost for the market, saying, “We want to explain the path of future increases more clearly.” It is at this point that investors get that feeling: “Have we seen this movie before?”
The Pre-Dot-Com Scene
During the 1998 – 2001 period, the game was simple, but its impact was significant:
Japan was focused on low-interest, stable but risk-averse growth, where risky investments were not highly favored. On the US side, there was an allure of risky, fast-growing, and story-driven assets. This situation was used for carry trade, injecting liquidity into risky markets. The yen was used as funding currency and converted into US dollars, inflating assets in the risk-reward balance.
The mechanism we call carry trade became much more systemic during this period. Borrow in yen and invest in US assets offering higher returns.
However, this structure relied on a very delicate balance. When things went wrong in the US or Japan declared, “I’m no longer passive in this game,” positions were quickly closed. The yen strengthened, risky assets collapsed, and the bubble burst. The dot-com crash didn’t happen overnight, but monetary policy divergence was one of the silent triggers of that collapse.
Today’s Scene
Today’s Scene
The interest rate cut cycle has begun and the roadmap continues to be developed, the economic slowdown is being priced in, and there is significant appetite for high-risk and risky assets.
Japan
The BOJ is pulling the plug on its ultra-loose policy, with a 0.75% interest rate being high for Japan. There is a critical difference at this point:
In 1999, Japan was silent; in 2025, Japan is speaking up.
New Characters: Crypto and DOGE
There are two elements that weren’t present during the dot-com era but are changing the game today:
The Japanese government’s fiscal discipline initiative
The “Government Efficiency Department (DOGE)” is being established, signaling that the era of reckless spending is over and that this will not be limited to the interest rate domain. This provides a financial foundation supporting the BOJ’s tightening.
Crypto tax reform
A plan to reduce crypto gains from rates as high as 55% to a flat 20% tax, in line with financial products.
Japan now views crypto not as an “avoided risk” but as a “managed investment tool.” This is the biggest difference from the 1999 cycle.
Why Déjà Vu?
The US is easing, Japan is tightening, the interest rate differential is being repriced, carry trade may remain on the table, liquidity injections may decrease, and finally, fragility in risky assets is increasing.
Differences
Today, crypto exists, retail investors are much more active than in the past, and the current regulatory framework provides a clear structure rather than uncertainty. The mechanism is the same, but the channels of impact are faster and more severe.
Impact on Cryptocurrency
Immediate Effects
Every “hawkish” message from the BOJ strengthens the Yen, unsettling carry trade participants and those who use this method to move funds into risky markets.
Outcome for Crypto
While there are strong signals that volatility may increase, each fluctuation will shake futures users according to their risk appetite, as it will trigger a new leveraged position clean-up. In addition, the risk of reduced liquidity injections on Bitcoin and major altcoins is coming to the fore.
Medium- to Long-Term Effects
A 20% tax reform could act as a lifeline to bring Japanese individual investors back into the game, potentially attracting new players to crypto and re-engaging Japanese investors. Japan’s appeal also increases for institutional investors.
Crypto Market Outcomes
In the short term, the BOJ’s tightening messages and declining liquidity through the carry trade channel set the stage for sharp fluctuations and sudden pullbacks in the crypto market. Especially during periods of high leverage positions, this process can turn into rapid sales and chain liquidations that create a “crash feeling.”
However, this pressure is cyclical rather than structural. Moreover, the fact that this movement coincides with a potential bear phase in crypto’s own internal cycles makes it a cleansing and balancing factor rather than a suppressing one. On the other hand, as demand from Japan is rebuilt alongside tax reform and regulatory clarity, the cryptocurrency market is evolving into a more robust, institutional, and deeper market structure in the long term, even if it experiences short-term turbulence. This scenario suggests that the narrative of the next cryptocurrency cycle may emerge not from the westernmost part of the world, the US, but from the easternmost part, Japan.
Disclaimer
This content is only for information and analysis, not for investment, financial consultation, or legal opinions. The analysis listed here is a version of the general economic condition, interpreted historically, or by market players in its current form. It is subject to change without notice. Cryptocurrency markets are characterized by liquidity conditions, leverage exertions and symmetry with global monetary policy. Past market cycles or historical comparisons do not guarantee future outcomes in the modern world. Readers themselves should look deeply into things and consult qualified financial professionals before making any decisions on investments.
