Bank of Japan Holds Off on Rate Hike, Giving Bitcoin a Boost

TLDR

• Bank of Japan Governor Ueda signaled no rate hike likely at the April 28 meeting
• This keeps the yen weak and the yen carry trade cheap, supporting crypto prices
• Bitcoin broke past $74,000 partly on the back of this news
• A surprise BOJ hike in August 2024 crashed Bitcoin 24% in 48 hours
• If U.S.-Iran talks lower oil prices, Japan has even less reason to hike rates

Bitcoin climbed past $74,000 on Monday, and one reason is a decision made thousands of miles away in Tokyo.

Bank of Japan Governor Kazuo Ueda signaled that the central bank is unlikely to raise interest rates at its April 28 policy meeting. The move eased pressure on risk assets like Bitcoin and other cryptocurrencies.

The BOJ had been expected to hike. Markets were pricing in a 60–70% chance of a rate increase just weeks ago, after Ueda and other officials made hawkish comments earlier this year.

But the ongoing conflict in the Middle East changed the calculation. Japan imports more than 90% of its oil through the Strait of Hormuz, which Iran has been blocking. That makes Japan’s economy especially exposed to the war.

BOJ policymakers are now split. Some want to hike because inflation has been running near the 2% target for almost four years. Others want to wait and see how the conflict plays out before making any moves.

The result is uncertainty, and the BOJ is now expected to hold rates steady in April while raising its inflation forecasts and cutting its growth outlook.

Why This Matters for Bitcoin

The yen carry trade is at the center of the story. Investors borrow cheaply in Japanese yen and put that money into higher-yielding assets, including crypto. A weak yen and low Japanese interest rates keep that trade cheap and running.

When the BOJ raised rates unexpectedly in August 2024, that trade unwound fast. Bitcoin fell from $64,000 to $49,000 in just 48 hours.

Ueda’s latest comments mean that trade stays alive for at least another month. Japan’s 20-year bond auction on Tuesday backed that up, drawing its strongest demand since 2019, with a bid-to-cover ratio of 4.82 compared to a 12-month average of 3.27.

Twenty-year yields fell nine basis points after the auction. The yen is currently trading near 160 against the dollar.

Open Interest Climbs as Carry Trade Continues

Last week, Bitcoin futures saw $2.1 billion in new open interest in 24 hours. Ether added $2.2 billion. Coin-denominated data confirmed net new long positions were being opened.

Some of that new positioning may be funded, directly or indirectly, by yen liquidity that Ueda just preserved.

If ongoing U.S.-Iran talks result in a deal and oil prices keep falling, Japan’s inflation pressure would ease further. That would give the BOJ even less reason to raise rates and extend the window for the carry trade to support crypto prices.

Japan’s Trade Minister Ryosei Akazawa said on Sunday that a rate hike “could be among options” to support the yen, given how low Japan’s real interest rates remain.

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