The Bank of Japan is expected to raise its key rate to 1% from 0.75% when the meeting ends on June 16, the highest level since 1995, and to signal readiness to continue.
That brings the yen carry trade back into focus, which has tended to weigh on the crypto markets. For decades, a cheap yen has funded leveraged bets on risky assets, including crypto.
Higher Japanese interest rates and a firmer yen make the loan more expensive and could force a liquidation that drains global liquidity. The last time the BOJ surprised with a hike, on August 5, 2024, the resulting relaxation dropped bitcoin from around $64,000 to $49,000 in two days.
The move would put Japan in line with the ECB, which hiked on Thursday, and a Fed that this week’s energy-driven inflation has been on hold. Policy is tightening on all fronts, the opposite of the easy liquidity that fuels crypto.
As such, the increase is widely expected and mostly priced in, and even at 1%, Japan’s real interest rates remain deeply negative, so the carry trade is not dead. Japanese investors have continued to buy foreign assets, with little sign of easing so far.
However, a sign of caution is a hawkish forward signal landing on extended positioning, with speculative bets against the yen back close to their July 2024 levels.
Crypto shrugs for now. Bitcoin trades up on SpaceX’s IPO day near $63,000, per CoinDesk data.
