Bitcoin Tops $77,000 After Bank of Japan Raises Interest Rates 25 Bps

Bitcoin moved higher as the Japanese yen weakened after the Bank of Japan lifted its benchmark interest rate to a 31-year high.

The BOJ raised its policy rate by 25 basis points on Friday to 1.25%, marking its second increase in three months. The central bank is navigating persistent inflation while also dealing with a yen that has remained weak for an extended period.

Policymakers said the latest move was driven in part by the risk that inflation could exceed the BOJ’s 2% target. Rising energy prices and more expensive imports were identified as potential contributors to further price increases.

The decision came weeks after U.S. Treasury Secretary Scott Bessent publicly called on Japan to tighten monetary policy more rapidly to help strengthen the yen. Bessent has argued that stability in the currency market supports the U.S. Treasury market and said coordinated intervention to purchase yen is consistent with U.S. interests.

Bitcoin’s BTC/JPY pair on Tokyo-based bitFlyer rose 0.5% to JPY 12.06 million after the rate announcement. BTC also climbed in dollar terms, reaching $77,400 after recovering from an overnight low of $76,200, according to CoinDesk data.

Meanwhile, the yen lost ground against the dollar, pushing USD/JPY to 156.70 from 156.20.

Rate Differential Keeps Carry Trades in Play

The BOJ’s policy decisions and movements in the yen are closely followed by global investors because Japan maintained near-zero interest rates for more than a decade. The low-rate environment encouraged traders to borrow yen and invest in assets offering higher yields abroad.

This practice, known as the yen carry trade, has raised concerns about the possibility of a broad market sell-off if those positions are rapidly unwound. The sharp declines in equities and bitcoin during early August 2024 were viewed by some observers as evidence of that vulnerability.

For now, the interest-rate gap remains wide. Even after the BOJ’s latest increase, Japanese rates are well below U.S. rates, leaving yen-funded carry trades relatively attractive.

Earlier this week, the Federal Reserve raised its benchmark rate by 25 basis points to a target range of 3.75%-4.00%, its first hike since 2023. Goldman Sachs and Morgan Stanley are now among the investment banks projecting another Fed rate increase in October.

03:32 UTC: Added details on the BOJ’s inflation outlook and yen carry trades.