Global inflation acceleration shakes up the cryptocurrency market—The divergence from Japan's inflation rate reflects the challenges of 2026

According to the latest analysis by Adam Posen, Director of the Peterson Institute for International Economics, and Peter R. Orzag, CEO of Lazard, U.S. inflationary pressures are expected to accelerate at a faster pace than previously anticipated. Their research highlights that multiple factors—such as Trump-era tariffs, tight labor markets, immigration deportations, and expanding fiscal deficits—may offset productivity gains from AI technology and a cooling housing market, potentially pushing inflation higher. Meanwhile, the trajectory of Japan’s inflation rate remains a key variable influencing volatility in global financial markets.

This scenario vividly reflects the disconnect between investor expectations and reality in the cryptocurrency market. The Bitcoin (BTC) bullish scenario of rate cuts in a deflationary environment, as envisioned by crypto optimists, is poised to change significantly due to the re-acceleration of inflation.

Background on U.S. Inflation Forecast—Contrasting with Japan’s Inflation Rate

According to Posen and Orzag, the U.S. Consumer Price Index (CPI) could exceed 4% this year, a substantial rise from the 2.7% forecast for 2025. Given that U.S. Treasury yields have already risen to 4.31% (a five-month high), market participants are beginning to price in these inflationary pressures.

The drivers of accelerating inflation are multifaceted. Tariffs on imported goods imposed during the Trump administration could lead to full cost pass-through by mid-2026, with headline inflation expected to increase by 50 basis points during this process. Tight labor markets and immigration deportations are creating labor shortages, which will exert upward pressure on wages and accelerate demand-driven inflation. Additionally, government spending that pushes the fiscal deficit above 7% of GDP also contributes to rising prices.

Interestingly, these inflationary pressures in the U.S. contrast with the movement of Japan’s inflation rate. In the global financial markets, differing inflation trajectories across regions influence policy responses, which in turn affect risk assets including cryptocurrencies.

Narrowing of Monetary Policy Options—Market Revisions of Rate Cut Expectations

Persistent high inflation significantly limits the Federal Reserve’s pace of rate cuts. While several investment banks forecast a 50–75 basis point cut this year, crypto bulls had been assuming more aggressive monetary easing. However, this scenario is rapidly losing plausibility.

Bitunix analysts note, “The real policy risk today is not premature easing, but the possibility that authorities will remain cautious even after a structural deflation driven by the AI productivity revolution is realized.” In other words, markets are beginning to worry about a “policy lag.” This perception is prompting market participants to preemptively adjust prices downward, exerting pressure to sell risk assets.

Rising Treasury Yields and Spillover Effects on Risk Assets

The rise of U.S. Treasury yields to a five-month high is driven by upward revisions in inflation expectations. Additionally, news of Japanese government bond yields reaching record highs has further fueled the rally in global bond yields. These trends are diminishing the relative attractiveness of risk assets such as stocks and cryptocurrencies.

In fact, Bitcoin recently declined by about 4%, falling to around $87,990 (as of January 29, 2026). This price movement clearly reflects the selling pressure on risk assets in a rising interest rate environment.

What Japan’s Inflation Rate Suggests About Global Uncertainty

Japan’s inflation trend is increasingly seen as a source of global financial market uncertainty. As inflation trajectories diverge across Japan, the U.S., and the global economy, differing policy stances among countries could introduce new volatility into currency markets and international capital flows.

As both analysts point out, as long as downward pressures from housing inflation and productivity improvements are outweighed by upward pressures from tariffs, labor costs, and fiscal burdens, the risk of sustained high inflation will persist. In this environment, how Japan’s inflation rate responds could significantly influence global capital flows.

Adjustment Phase in the Cryptocurrency Market—Adapting to a New Reality

For Bitcoin investors who believed in the scenario of “deflation expectations → rapid rate cuts → risk asset rally” throughout 2025, the current developments are unexpected. The re-acceleration of inflation and the slowdown in rate cuts are forcing a major revision of the bullish crypto scenario.

In the short term, a strengthening dollar and rising U.S. Treasury yields will continue to pressure risk assets, including Bitcoin. However, markets are expected to adapt over time to the new inflation and interest rate environment. The key factor will be how global inflation trends, including Japan’s inflation rate, influence future policy decisions and asset allocations.

Posen and Orzag’s warnings are not merely economic forecasts but serve as a fundamental call for all risk asset investors, including those in cryptocurrencies, to reassess their scenarios fundamentally.