The Bank of Japan raised its benchmark interest rate by 25 basis points to 0.75% on Friday, reaching its highest level since 1995. The unanimous decision reflects growing confidence that inflation is becoming more stable in Japan’s economy. Governor Kazuo Ueda stated that further hikes could follow, depending on economic conditions.
The move was widely expected by economists and markets. The yen slipped slightly after the announcement, while 10-year Japanese government bond yields rose above 2% for the first time since 1999.
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Bitcoin and Ethereum Rise After the Decision
Despite some earlier speculation that the rate hike might hurt risk assets, Bitcoin rose nearly 1% after the news, trading just above $88,000.
Ethereum gained over 3.5%, reaching $2,950 and approaching the $3,000 level. Other major cryptocurrencies also saw modest gains, with the exception of XRP, which remained slightly down but less than 0.5%.
The reaction contrasts with earlier fears that a tighter Japanese policy could trigger a broader pullback in crypto markets. So far, those fears haven’t materialized.
Read also: Will Japan’s Interest Rate Decision Affect the Crypto Market?
Was the Carry Trade Unwind Overhyped?
A key concern before the hike was the impact on the yen carry trade, where investors borrow in yen to invest in higher-yielding assets elsewhere. A stronger yen and higher Japanese rates could, in theory, make this trade less attractive and push capital out of risk markets like crypto.
However, this risk appears muted for now. The hike was not a surprise, and many large investors had already adjusted their positions in anticipation.
Moreover, while Japan has a large retail crypto base – over 13 million users – their total holdings are estimated at around 5 trillion yen, or $33 billion. That’s small relative to global crypto markets. A shift in Japanese investor behavior may not be enough to cause major price swings.
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Looking Ahead
For now, markets appear calm. Bitcoin is holding above support levels, and there’s no sign of a sell-off linked to Japan’s policy shift. While global liquidity remains a key factor to watch, Japan’s decision, though historically significant, hasn’t triggered the kind of volatility some feared.
Whether future hikes will have more impact may depend on broader conditions – not just what happens in Tokyo, but how the rest of the world reacts.
