Hassan Maishera
TL;DR
-
The Bank of Japan raised its benchmark interest rate by 25 basis points to 1.25%.
-
The increase was the BOJ’s second in three months and took rates to their highest level in 31 years.
-
Bitcoin climbed to $77,400, while BTC/JPY advanced to approximately ¥12.06 million.
-
The yen weakened after the decision, pushing USD/JPY from 156.20 to 156.70.
BOJ Raises Benchmark Rate to 1.25%
The Bank of Japan increased its benchmark interest rate by 25 basis points on Friday, taking it to 1.25% as policymakers respond to persistent inflation and continued weakness in the yen.
The move represents the central bank’s second rate increase in three months. It also lifted Japan’s benchmark rate to its highest level in 31 years, further distancing the BOJ from the ultra-loose monetary policy that defined much of the country’s recent economic history.
The decision came several weeks after U.S. Treasury Secretary Scott Bessent publicly urged Tokyo to tighten monetary policy more quickly to support the yen. Bessent argued that orderly trading in the Japanese currency benefits U.S. Treasury market stability.
He also defended coordinated intervention to purchase yen, maintaining that the measure served American economic interests.
Bitcoin Climbs Following BOJ Decision
Bitcoin advanced after the rate announcement despite the possibility that tighter Japanese monetary policy could weigh on risk assets.
The BTC/JPY pair on Tokyo-based exchange bitFlyer gained approximately 0.5% to reach ¥12.06 million.
Bitcoin’s dollar-denominated price climbed to $77,400, extending its rebound from an overnight low near $76,200.
The cryptocurrency’s gains suggest traders had either anticipated the BOJ’s move or did not view the rate increase as an immediate threat to liquidity conditions.
Yen Weakens Against the Dollar
The yen declined following the decision, with USD/JPY rising to 156.70 from approximately 156.20.
A weaker yen after an interest-rate increase may indicate that traders had already priced in the move or expected a more aggressive signal from the BOJ about future tightening.
Currency markets will now watch the central bank’s guidance for clues about the timing and scale of further rate increases.
BOJ decisions have implications beyond Japan because the yen has long played a central role in global carry trades.
Years of near-zero Japanese interest rates encouraged investors to borrow cheaply in yen and invest the funds in higher-yielding assets elsewhere. Rising Japanese borrowing costs or a sharp yen appreciation could force traders to unwind those positions.
Such an unwind could trigger selling across equities, cryptocurrencies and other risk-sensitive markets. The sharp market decline in early August 2024 was widely seen as an example of the disruption a rapid carry-trade reversal can cause.
Fed Hike Adds to Global Tightening
The BOJ increase follows the Federal Reserve’s decision earlier this week to lift its benchmark rate by 25 basis points to a target range of 3.75% to 4.00%.
It was the Fed’s first increase since 2023. Goldman Sachs and Morgan Stanley now expect another U.S. rate hike in October, potentially adding further pressure to global liquidity and risk assets.
