Rate hikes are generally bearish for risky assets like cryptocurrencies, especially from the BOJ, whose long period of ultra-low rates has supported bull markets in global stocks and bonds.
The positive crypto reaction likely stems from a key conciliatory element of the announcement: the BOJ’s decision to suspend bond tapering.
As InvestingLive noted, “the bond reduction pause from April 2027, setting monthly JGB purchases at around ¥2 trillion, is the complicating factor: it removes a source of upward pressure on long-term yields and could be interpreted as a concession to government concerns about borrowing costs, raising questions about the BOJ’s operational independence even as it tightens policy rates.” »
By suspending the tapering of bond purchases (or stabilizing their unwinding), the BOJ is in effect seeking to limit upward pressure on government bond yields. This could help control borrowing costs in the long term, support financial markets and counterbalance the more restrictive policy stance in the short term.
Overall, while the rise in overall interest rates was expected, the dovish focus on bond purchases likely helped calm markets and fuel bitcoin’s rebound.
