In Japan, discussions about raising the rate have resumed. After oil prices rose and the yen weakened, inflation in the country continues to accelerate faster than expected.
The March minutes made it clear that there are already enough supporters of a tighter policy within the Bank of Japan. Some representatives of the regulator believe that if oil continues to rise in price, it will be harder to delay a rate hike.
During the discussion, one board member directly opposed long pauses between decisions. Another allowed for more drastic action from the central bank if the Japanese economy can withstand the consequences of the conflict around Iran.
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Similar thoughts were voiced in the April Summary of Opinions, which the Bank of Japan published later. There, representatives of the Bank of Japan also spoke about the risk of increasing inflationary pressure.
At the same time, at the end of April meeting, the rate was still left at 0.75%. But there is no longer a unified position within the board. Three representatives of the regulator immediately supported the idea of raising the rate to 1%.
Why Rates in Japan Are Putting Pressure on Bitcoin
At the beginning of the year, Bank of Japan Governor Kazuo Ueda allowed for further rate hikes if inflation continued to accelerate.
For the crypto market, such statements usually end badly. After each rate hike in Japan over the past year and a half, bitcoin has lost value fairly quickly.
One of the sharpest crashes occurred in the summer of 2024. Then the Bank of Japan raised the rate to 0.25%, after which the yen began to strengthen rapidly against the dollar. Against this backdrop, bitcoin fell in just a few days from about $65,000 to $50,000.
A similar reaction occurred in January 2025, when the rate was raised to 0.50%. After the regulator’s decision, the market went down again.
This is largely due to the so-called yen carry trade. When rates in Japan start to rise, investors unwind risky trades and withdraw money from more volatile assets. Crypto usually suffers first.
Now the market is already pricing in a high probability of another rate hike by the Bank of Japan in June. According to Barclays and swap market participants, the probability of such a scenario is about 74%.
Bank of Japan Increasingly Concerned About Rising Oil Prices
Bank of Japan updated its forecasts for the coming years. Now the regulator expects higher inflation and a weaker economy.
The forecast for price growth for the 2026 fiscal year was raised to 2.8%. Previously, expectations were noticeably lower. At the same time, the GDP forecast worsened.
After the escalation around Iran, oil began to rise again. For Japan, this became an additional problem, because along with rising energy prices, the yen continued to weaken.
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Within the central bank, they already admit that inflation may linger longer than previously expected. They are also separately discussing the impact of a weak yen, which is causing imports and domestic prices to continue rising.
If oil remains expensive, inflation in the country is unlikely to return quickly to previous levels.
In early May, authorities tried to stop the yen’s decline through currency interventions. But the market still doubts that this will be enough. Japan still heavily depends on oil imports, and purchases are made in dollars.
Bank of Japan Decision in June May Hit Crypto
For the market, everything now revolves around the June meeting of the Bank of Japan. Investors fear that the regulator may raise the rate again. Such decisions usually negatively affect crypto and other risky assets.
After the latest comments from the Bank of Japan, market participants have become more cautious about risky positions. The yen has strengthened slightly against this backdrop, and some capital has started to leave more volatile assets.
Now everything depends on oil. Due to the situation around Iran, prices continue to rise, and with them inflation in Japan is also accelerating. Against this backdrop, the Bank of Japan is increasingly discussing another rate hike.
