Bitcoin The currency strengthened as the Japanese yen fell after the Bank of Japan (BOJ) raised interest rates as expected.
Japan’s central bank raised its short-term policy rate by 25 basis points to 0.75%, the highest level in about three decades, continuing its gradual shift away from decades of ultra-accommodative monetary policy.
In its policy statement, the BoJ acknowledged that inflation has remained above its 2% target for a prolonged period due to rising import costs and strengthening domestic price dynamics. However, policymakers stressed that inflation-adjusted interest rates remained negative, implying that monetary conditions remain accommodative even after the hike.
The Japanese yen slipped to 156.03 per U.S. dollar, from 155.67 following the rate decision. Bitcoin, the leading cryptocurrency by market value, rose from $86,000 to $87,500 before retreating slightly to trade near $87,000 at press time, according to CoinDesk data.
The market reaction is in line with expectations, as the rate hike had already been anticipated and largely priced in. Additionally, speculators had held long positions in the Japanese yen for weeks, preventing any strong yen buying reaction after the announcement.
In recent weeks, some observers have expressed concerns that rising rates could strengthen the yen, triggering an unwinding of yen carry trades and a widespread sense of risk aversion. CoinDesk allayed those fears, however, pointing to the yen’s already bullish positioning in the currency market and the upward trend in Japanese government bond yields – both indicating little sign of panic over the impending rate hike.
