The yen fell as Bitcoin surged following the BOJ's rate hike to a 31-year peak.
By Omkar GodboleUpdated 20 min agoPublished 56 min ago2 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on BOJ raises interest rates. (Credit: By Wiiii-Wikimedia Commons/Modified by CoinDesk)SummaryShow- The BOJ raised interest rates on Friday as anticipated.
- The yen depreciated against both the dollar and Bitcoin after the rate increase.
- Bitcoin’s price in dollars reached $77,000.
On Friday, the Bank of Japan (BOJ) boosted its key interest rate by 25 basis points to 1.25%, marking the highest level in over three decades amid persistent inflation and a weak yen.
The central bank indicated that this decision was driven by concerns that inflation could exceed its 2% target due to rising costs of imports and energy.
This adjustment is the BOJ’s second increase in just three months and follows recent comments from U.S. Treasury Secretary Scott Bessent, who urged Japan to tighten its monetary policy more swiftly to support the yen. He emphasized that a stable yen market is beneficial for Treasury market stability and defended the coordinated intervention to buy yen as being in U.S. interests.
Following the BOJ's announcement, the Bitcoin-Japanese yen trading pair (BTC/JPY) on the Tokyo-based bitFlyer exchange saw a 0.5% increase, reaching JPY 12.06 million. Bitcoin's dollar price surged to $77,400, recovering from an overnight low of $76,200, according to CoinDesk data.
The Japanese yen weakened against the U.S. dollar, causing the USD/JPY pair to rise to 156.70 from 156.20.
The BOJ's rate decisions and yen fluctuations are believed to influence global markets due to Japan's long-standing low-interest-rate environment, which encouraged traders to borrow in yen to invest in higher-yielding assets elsewhere.
Concerns have existed that unwinding this carry trade could negatively impact all markets, as seen in the brief downturn in equities and Bitcoin in early August 2024, which some interpreted as a warning sign.
However, these fears may be overstated, as Japanese interest rates remain significantly lower than those in the U.S., maintaining an attractive yield gap for yen-funded carry trades.
This week, the Federal Reserve also raised its benchmark interest rate by 25 basis points, bringing it to a target range of 3.75%-4.00%, marking its first increase since 2023. Major investment banks, including Goldman Sachs and Morgan Stanley, anticipate further rate hikes from the Fed in October.
03:32 UTC: Adds a line on BOJ’s inflation outlook and yen carry trades
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