BOJ Rate Hike to 1.25% Sends Shockwaves Through Yen and Bitcoin Markets
The Bank of Japan (BOJ) is expected to raise its policy rate to 1.25%, the highest level since April 1995, at its meeting on Thursday and Friday.
Japanese short-term bond yields have already surged ahead of the decision, with the six-month bill yield closing near 1.335% last week. This is a significant jump from two years ago, when the same maturity traded below zero.
The BOJ's move is driven by fiscal concerns rather than inflation, as July consumer prices rose only 1.9% annually, below the 2% target for the seventh straight month. However, investors are demanding higher yields to hold Japanese government debt, with ministries requesting a record ¥143 trillion for the next fiscal year and the Finance Ministry lifting its assumed long-term bond rate to 3.8%.
The divergence between Japan's interest rates and Bitcoin is being closely watched, as the cryptocurrency has remained relatively stable despite the yen's recent gains. The Nikkei 225 has lost 8.4% in a month and trades 13% below its June record, but Bitcoin traded near $77,721, up 0.8% in 24 hours.