Bitcoin Rises as BOJ Lifts Rates to 31-Year High

The Bank of Japan raised its benchmark interest rate by 25 basis points on Friday to 1.25%, its highest level in 31 years, as policymakers respond to persistent inflation and continued weakness in the Japanese yen.

The BOJ said the rate hike was necessary as rising import costs and energy prices increase the risk that inflation could remain above its 2% target. The decision represents Japan’s second interest rate increase in three months and signals the central bank’s continued shift away from years of ultra-low borrowing costs.

The move also follows pressure from U.S. Treasury Secretary Scott Bessent, who urged Tokyo to tighten monetary policy more quickly to help stabilize the yen. Bessent has argued that orderly currency markets support U.S. Treasury market stability and defended coordinated yen-buying intervention as being consistent with U.S. interests.

Bitcoin reacted positively following the BOJ announcement. The BTC/JPY pair on Tokyo-based crypto exchange bitFlyer gained about 0.5% to 12.06 million yen. Bitcoin’s U.S. dollar price climbed to around $77,400, extending its recovery from an overnight low near $76,200.

Despite the rate increase, the yen weakened against the dollar. USD/JPY advanced to approximately 156.70 from 156.20.

BOJ monetary policy is closely watched across global financial and cryptocurrency markets because Japan’s historically low interest rates have encouraged the yen carry trade. Investors have traditionally borrowed inexpensive yen to finance investments in higher-yielding assets overseas.

Concerns persist that aggressive BOJ tightening could trigger an unwinding of these positions and pressure risk assets, including Bitcoin and equities. The market turbulence in August 2024 highlighted the potential impact of rapid carry-trade reversals.

However, Japan’s interest rates remain substantially below U.S. levels, leaving a sizable yield differential that could continue supporting yen-funded trades.

Earlier this week, the Federal Reserve increased its benchmark rate by 25 basis points to 3.75%-4.00%, its first hike since 2023. Goldman Sachs and Morgan Stanley now expect another Fed rate increase in October, keeping global interest-rate expectations firmly in focus for Bitcoin, the yen and broader financial markets.