Cryptocurrency markets remained on the back foot on Friday as macroeconomic signals from Japan, one of the world’s largest economies, heightened uncertainty over the Iran war.
Bitcoin Bitcoin prices are hovering near $77,800, struggling to break above Thursday’s high of $78,700 in early Asian trading, according to CoinDesk data. The broader uptrend that began in late March approached the $65,000 mark but appears to have stalled since Wednesday.
Ethereum (ETH), the second-largest cryptocurrency by market capitalization and trading around $2,300, is down 0.8% since midnight UTC, underperforming Bitcoin’s relatively modest 0.6% decline.
The cautious tone in the cryptocurrency market coincides with the release of new inflation data from Japan. The country’s Corporate Services Price Index (CSPI) rose 3.1% year-on-year in March, exceeding expectations of 3.0%, highlighting continued price pressure in the services industry.
Other government data showed core inflation rose to 1.8% in March from 1.6% in February, the first acceleration in five months. Headline inflation edged up to 1.5% from 1.3%, but remained below the Bank of Japan’s 2% target for the second month in a row. Meanwhile, core inflation, which excludes fresh food and energy, fell to 2.4%, the lowest level since October 2024.
The rise in headline inflation is consistent with rising energy costs related to geopolitical tensions, particularly disruptions to oil shipments in the Strait of Hormuz amid the ongoing conflict with Iran.
As a major crude oil importer, Japan remains particularly vulnerable to such price shocks. Since the outbreak of the Iran war in late February, WTI crude oil futures have risen more than 40% to $96.
Market participants will now turn their attention to the Bank of Japan’s upcoming policy meeting. Analysts at InvestingLive say the tone may be about to shift.
Analysts said: “The Bank of Japan looks set to stay on hold next week but issue a sharp warning that interest rates will move higher, with June firmly in effect as the risk of war-driven inflation intensifies.”
Signs of tighter monetary policy and potential interest rate hikes could boost the Japanese yen (JPY) and impact global market sentiment. This is especially true now given that speculative yen positioning is currently bearish, according to the latest data from the U.S. Commodity Futures Trading Commission (CFTC). Therefore, if the Bank of Japan turns hawkish, there is potential for a sharp bullish reaction in the yen.
As for the broader market impact, a stronger yen could be detrimental. Historically, the yen has been used to fund purchases of global risk assets. Therefore, a sudden currency appreciation may trigger the unwinding of these trades, leading to increased risk aversion.
Speaking of the Iran war, Axios reported that Iran deployed more mines in the Strait of Hormuz this week. Shipping traffic through the Strait of Hormuz
Oil, which accounts for 20% of the world’s seaborne oil, has declined sharply since the conflict intensified.
The Pentagon has warned lawmakers that clearing the strait of mines will take at least six months, a process that won’t begin until after the war is over. It also warned that U.S. inflation is likely to remain high this year, which could make it harder for the Federal Reserve to cut interest rates.
