Bitcoin breaks $87,000 as Bank of Japan interest rate hike sends yen lower.

Bank of Japan Hikes Rates, Bitcoin Gains as Yen Weakens

The Bank of Japan (BOJ) raised its short-term policy rate by 25 basis points to 0.75%, the highest level in nearly three decades, marking a gradual move away from decades of ultra-loose monetary policy.

Bitcoin (BTC $88,471.90) rose from $86,000 to $87,500 before settling near $87,000, while the Japanese yen slipped to 156.03 per U.S. dollar from 155.67.

The BOJ noted that inflation has remained above its 2% target due to rising import costs and stronger domestic prices, but real interest rates remain negative, meaning monetary conditions are still accommodative despite the hike.

The market reaction largely followed expectations. Speculators’ long yen positions limited sharp appreciation, and fears of a broad unwinding of carry trades were overstated. For decades, Japan’s near-zero rates made the yen a favored funding currency for investing in higher-yielding assets. Even after the hike, Japanese rates remain well below U.S. levels, reducing risks to global risk assets.