Bitcoin The yen strengthened after the Bank of Japan (BOJ) raised interest rates as scheduled.
The Bank of Japan raised its short-term policy interest rate by 25 basis points to 0.75%, the highest level in about three decades, as it continued to gradually move away from decades of ultra-loose monetary policy.
In its policy statement, the Bank of Japan acknowledged that inflation has remained above its 2% target for the long term due to rising import costs and stronger domestic price dynamics. However, policymakers stressed that interest rates, adjusted for inflation, remain negative, meaning monetary conditions remain loose even after the rate hike.
Following the interest rate decision, the yen fell to 156.03 against the dollar from 155.67. Bitcoin, the leading cryptocurrency by market capitalization, rose from $86,000 to $87,500 before falling slightly back to near $87,000, CoinDesk data showed.
The market reaction was in line with expectations, as the rate hike was anticipated and largely priced in. In addition, speculators have held long yen positions for weeks, preventing a violent yen buying reaction following the announcement.
In recent weeks, some observers have worried that higher interest rates could cause the yen to strengthen, triggering unwinding of yen carry trades and widespread risk aversion. However, CoinDesk debunked these concerns, pointing to already bullish yen positioning in currency markets and an upward trend in Japanese government bond yields — both of which indicate little sign of panic over an impending rate hike.