CoinDesk
The Bank of Japan raised its benchmark interest rate by 25 basis points to 1.25%, the highest level in 31 years. It was the BOJ’s second hike in three months and came as the central bank responds to sticky inflation and a chronically weak yen. Bitcoin held mostly steady near $76,900 in dollar terms, while BTC/JPY gained 0.5% to JPY 12.06 million on bitFlyer.
Why it matters
The rate increase was expected, but the yen weakened after the decision. USD/JPY rose to 156.70 from 156.20, showing that higher Japanese rates did not immediately translate into a stronger currency. U.S. Treasury Secretary Scott Bessent had recently urged Tokyo to tighten faster, arguing that an orderly yen market supports broader Treasury market stability.
Japan’s prolonged period of near-zero rates made the yen a major funding currency for the global carry trade. Investors borrowed yen to fund higher-yielding positions elsewhere, creating a channel through which BOJ decisions and yen moves can affect equities, bonds and crypto markets.
Market impact
The immediate reaction was mixed rather than a broad Bitcoin rally. BTC rose against the yen as the currency weakened, but its dollar-denominated price remained largely unchanged. That divergence makes BTC/JPY an important gauge of currency effects rather than a clean measure of fresh dollar demand for Bitcoin.
Markets remain focused on the risk that carry-trade positions unwind as Japanese rates rise. Observers have linked that risk to the equity and Bitcoin mini-crash in early August 2024, which offered a glimpse of how quickly a yen-funded deleveraging event can spread across global assets.
Frequently asked questions
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What rate did the Bank of Japan set after its latest hike?
The BOJ raised its benchmark rate by 25 basis points to 1.25%, the highest level in 31 years.
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How did the yen react to the BOJ rate increase?
The yen weakened after the decision. USD/JPY rose to 156.70 from 156.20.
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Why did Bitcoin rise against the yen while staying steady in dollars?
BTC/JPY gained 0.5% as the yen weakened, while Bitcoin’s dollar-denominated price remained mostly steady near $76,900.
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What is the yen carry trade?
The yen carry trade involves borrowing yen at low rates to fund higher-yielding investments in other markets.
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Why are markets watching a possible carry-trade unwind?
Higher Japanese rates can pressure yen-funded positions to close, potentially affecting equities, bonds and crypto markets at the same time.
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