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▲ Bitcoin (BTC), Japanese Yen (JPY)/AI-generated image
The Bank of Japan's 1.25% interest rate hike is imminent. Bitcoin (BTC) has not yet shown a clear impact, unlike the strong movements in the Japanese financial market.
According to BeInCrypto, a cryptocurrency media outlet, on September 14 (local time), the Bank of Japan (BOJ) will hold its monetary policy meeting this Thursday and Friday. The market sees a high possibility of raising the policy interest rate to 1.25%. If the interest rate rises to 1.25%, it will be the highest level since April 1995. In a Reuters survey, 66 out of 68 economists expected an interest rate hike this week. Approximately 90% of respondents predicted that the interest rate would reach 1.50% by the end of March next year.
The Japanese government bond market is rapidly reflecting the possibility of further tightening. The 6-month government bond yield closed at approximately 1.335% last Friday. Two years ago, the yield for the same maturity was negative. The 3-month yield rose to 1.25%, the highest in 31 years and 6 months. The 6-month yield also jumped to 1.34%, reaching its highest level in 31 years. The 10-year government bond yield reached 3% this month. This is the first time since 1996. The 2-year yield was approximately 1.85%.
BeInCrypto pointed to fiscal and government bond supply burdens as the backdrop for the rise in Japanese government bond yields. Japan's consumer prices in July rose by 1.9% compared to the same month last year. Core inflation was 1.8%. Core inflation remained below the Bank of Japan's 2% target for seven consecutive months. Meanwhile, Japanese government ministries requested a record high of 143 trillion yen for the next fiscal year's budget. The Ministry of Finance also raised its long-term government bond interest rate assumption to 3.8%.
Changes have also been observed in Yen carry trade and capital flows. The Yen rose by approximately 6% from its July low after Japan and the United States intervened jointly for the first time since 2011. The intervention amounted to a record high of 15.4 trillion yen. Speculators turned to net buying of Yen in the week up to September 8. The change in positions amounted to 103,000 contracts. Japan's holdings of US Treasury bonds decreased by $122.6 billion from February to June. During the same period, the Nikkei 225 index fell by 8.4% in one month. Compared to its peak in June, it was 13% lower.
Bitcoin is showing a different trend from the Japanese financial market. However, the Bank of Japan's signals for further tightening remain a key variable. When the Bank of Japan raised interest rates by 0.25% in August 2024, the Nikkei 225 index plummeted by 12.4% in a single day. Bitcoin also fell from approximately $70,000 to $49,000. BeInCrypto focused on the future pace of interest rate hikes rather than the 1.25% increase itself. The analysis suggests that whether the Bank of Japan strongly expresses its intention for further tightening will be a variable that determines the direction of Bitcoin and the Japanese financial market.
[Article Key Summary]
-The Bank of Japan is expected to raise its policy interest rate to 1.25%, bringing it to its highest level since April 1995.
-While Japanese government bond yields have surged and the Yen and stock markets have moved significantly, Bitcoin has not yet shown a clear impact.
-BeInCrypto identified the future pace of additional rate hikes suggested by the Bank of Japan, rather than the current rate increase, as the key variable.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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