The Bank of Japan is expected to raise its key interest rate from 0.75% to 1% after its meeting on June 16, the highest level since 1995, and signal that it is ready to continue on this path.
This brings Yen trading back to the forefront, which has tended to impact crypto markets. For decades, a cheap yen has financed leveraged bets on risky assets, including cryptocurrencies.
Higher Japanese rates and a firmer yen make such borrowing more expensive and could force an unwind that drains global liquidity. The last time the BOJ surprised with a hike, on August 5, 2024, the resulting unwind caused bitcoin to fall from around $64,000 to $49,000 in two days.
The move would align Japan with the ECB, which raised rates on Thursday, and a Fed that kept energy-related inflation in place this week. Policy is tightening on all fronts, in stark contrast to the easy liquidity that fuels crypto.
As such, the rise is widely expected and largely priced, and even at 1%, Japan’s real rates remain deeply negative, so the carry trade is not dead. Japanese investors have continued to buy foreign assets, and there is little sign of a slowdown so far.
A sign of caution, however, is the arrival of a hawkish signal on extended positioning, with speculative bets against the yen returning near their July 2024 levels.
Crypto shrugs for now. Bitcoin is trading on the day of SpaceX’s IPO at nearly $63,000, according to CoinDesk data.
