Interest rate hikes are typically bearish for risk assets like cryptocurrencies, especially from the BOJ, whose long era of ultra-low interest rates had supported the global equity and bond bull markets.
The positive crypto reaction likely stemmed from a key element of the announcement: the BOJ’s decision to pause its bond adjustment.
As InvestingLive noted, “The bond tapering pause from April 2027, which sets monthly JGB purchases at around 2 trillion yen, is the complicating factor: it removes a source of upward yield pressure in the long run and can be read as a concession to the government’s concerns about borrowing costs, raising questions about its reliance on the BOJ’s policies, even its operating rate.”
By pausing the reduction in bond purchases (or dampening unwinding), the BOJ is effectively seeking to limit upward pressure on government bond yields. This can help keep long-term borrowing costs in check, support financial markets and provide a counterweight to tighter short-term policy.
Overall, while the overall rate hike was expected, the dovish tilt toward bond buying likely helped calm markets and fueled the rally in bitcoin.
