The Bank of Japan raised its key interest rate by 25 basis points to 0.75% — the highest in nearly 30 years. Traditional markets reacted with a rise in Japanese indices, bond yields rose above 2%, and the yen weakened against the dollar.
Participants in the crypto market prepared for a severe decline, as past decisions by the regulator had often coincided with crashes. However, this time there was no sharp drop. The reaction was calm, although tension remains. We gathered the main information about the Bank of Japan's decision and its consequences in one overview.
Why Japan's rate is important for Bitcoin
The main role is played by the carry trade — a strategy where money is borrowed in a low-interest country and moved to where yields are higher. For many years, Japan has been a source of cheap borrowing. Investors took capital in yen, converted it to dollars, and directed it to higher-yielding assets, including cryptocurrencies.
When the rate rises:
the cost of borrowing increases;
carry trade becomes less profitable;
large investors begin to reduce risk.
At this moment, pressure on Bitcoin and the digital asset market as a whole increases.
There is no panic, but tension remains
The crypto market did not crash. This likely happened because the increase to 0.75% was priced in advance. The main focus is now on the future policy of the regulator. Analyst Marty Party notes that investors are closely watching the statements of Bank of Japan Governor Kazuo Ueda. If he signals a continuation of tightening, the impact of the current decision will be intensified.
Analyst Quentin Francos emphasizes that past interest rate hikes in Japan were accompanied by significant declines in Bitcoin:
March 2024 — a decrease of about 27%;
July 2024 — a decrease of about 30%;
January 2025 — a decrease of almost 30%.
Each time the cost of funding rises, it leads to a retreat from risky assets. Risks of a repeat of history should not be excluded.
The main risk for the market
The most dangerous part is not the usual selling, but the liquidation of leveraged positions. The crypto market largely relies on perpetual contracts and margin trading. When pressure increases and Bitcoin loses important support levels, the following processes occur:
positions reach the liquidation threshold;
exchanges begin forced sales;
a chain reaction is triggered.
Thus, local pressure turns into an avalanche.
What signals are important for the crypto market right now
The market is closely monitoring several key factors:
yen exchange rate;
yield of Japanese bonds;
change in open interest on cryptocurrency exchanges;
behavior of key support levels for Bitcoin;
tone and content of the Bank of Japan's statements.
Soft rhetoric reduces tension. Strong hints at a new cycle of rate hikes increase pressure.
Summary
The rate hike to 0.75% solidified Japan's policy change after many years of ultra-loose conditions. Traditional markets reacted calmly to the decision. The crypto market, despite expectations of a crash, maintained its positions.
Experience from previous years reminds us that the tightening of Japanese policy has coincided with significant declines in Bitcoin more than once. The further development of the situation depends on whether this step will be a one-time event or turn into a long-term behavior of the regulator.
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