Why does Japan's interest rate have a strong impact on Bitcoin?
Whenever the Bank of Japan (BOJ) "stirs" to raise interest rates, the global financial markets almost immediately react: the Yen strengthens, Japanese bond yields soar to their highest levels since 2008, while risk assets—especially Bitcoin—are often sold off.
But why does just one signal from Japan cause such a stir in the crypto market?
The reason lies in the carry trade, a strategy that global financial circles have used for many years. Investors borrow Yen at ultra-low interest rates and then invest the capital in higher-yielding assets like stocks, high-yield bonds, and even crypto.
When the BOJ is preparing to raise interest rates, the cost of borrowing Yen increases → cash flow must tighten → investors are forced to close positions, pulling capital out of risk assets. The selling pressure spills over into the crypto market, and BTC becomes one of the assets that reacts the strongest.
In short: the more "hawkish" the BOJ, the tighter the carry trade → the easier it is for Bitcoin to experience strong fluctuations.
