Japan's central bank pulled the trigger again. On Friday, the Bank of Japan lifted its benchmark rate by 25 basis points to 1.25% — the highest it's been in three decades — as officials try to get a handle on inflation that won't quit and a yen that's been stuck in the doldrums. Rising import costs and energy prices, the BOJ said, threaten to push inflation past its 2% target.
It's the bank's second hike in as many quarters, and it comes not long after U.S. Treasury Secretary Scott Bessent publicly leaned on Tokyo to move faster on rates. Bessent's argument: a more orderly yen helps keep the Treasury market stable, and that coordinated yen-buying intervention everyone's been talking about actually serves U.S. interests too.
Crypto markets took notice. On bitFlyer, Tokyo's bitcoin exchange, the BTC/JPY pair climbed another 0.5% to JPY 12.06 million after the announcement. In dollar terms, bitcoin pushed up to $77,400, building on its bounce back from an overnight low near $76,200, according to CoinDesk. The yen, meanwhile, slipped against the dollar, with USD/JPY ticking up to 156.70 from 156.20.
None of this happens in a vacuum. Japan spent the better part of a decade — maybe longer — at near-zero rates, which made it cheap for traders to borrow yen and plow the money into higher-yielding bets elsewhere. That's the carry trade, and when it unwinds fast, markets feel it. Just ask anyone who lived through the equities and bitcoin scare in August 2024.
But maybe the worry is a bit overdone this time. Even with the latest hike, Japanese rates are still nowhere near U.S. levels — the gap's wide enough that yen-funded carry trades still make sense for a lot of traders.
Across the Pacific, the Fed had already made its move earlier in the week, raising rates by 25 basis points to a range of 3.75%–4.00% — its first hike since 2023. And it might not be the last: both Goldman Sachs and Morgan Stanley are now penciling in another increase come October.
