A former Bank of Japan official warned that Japan’s central bank may raise rates more quickly this year, potentially pushing borrowing costs above 2%. The shift matters for crypto because a stronger yen could affect risk assets, while bitcoin and the yen have recently shown a positive correlation.
A former Bank of Japan official warned that Japan’s central bank may raise rates more quickly this year, potentially pushing borrowing costs above 2%. The shift matters for crypto because a stronger yen could affect risk assets, while bitcoin and the yen have recently shown a positive correlation.
The development matters because Japanese monetary policy has become an important global market signal. Faster tightening could help stabilize or lift the yen, but it could also pressure risk assets if investors unwind trades that were built around years of cheap yen borrowing.
The Bank of Japan may move faster on interest-rate hikes this year as the yen continues to weaken, according to former BOJ official Tsutomu Watanabe, now an economics professor at the University of Tokyo. Watanabe warned that the central bank’s benchmark rate could eventually rise above 2%, CoinDesk reported, citing Bloomberg.
The development matters because Japanese monetary policy has become an important global market signal. Faster tightening could help stabilize or lift the yen, but it could also pressure risk assets if investors unwind trades that were built around years of cheap yen borrowing.
Japan’s official rate currently stands at 1% after recent increases, while the country’s 10-year government bond yield is above 2.8%, its highest level in at least three decades, according to TradingView data cited by CoinDesk. Even so, the yen has continued to fall, weakening to 162.36 per U.S. dollar after a 60% decline since early 2021, and dropping 3% so far this year.
For crypto markets, the impact is not straightforward. One market concern is that a sustained yen rally could trigger a broader retreat from bullish positions in government bonds, technology stocks and crypto that were financed through low-cost yen borrowing.
At the same time, CoinDesk noted that bitcoin and the yen have recently developed a strong positive correlation, with both falling against the dollar. That relationship complicates the usual assumption that a stronger yen would necessarily be negative for bitcoin.
A rapid pace of BOJ rate increases could also worsen Japan’s fragile fiscal position, an argument made by several economists. For now, the outlook remains dependent on how far the yen falls, how quickly the BOJ responds and whether global investors treat tighter Japanese policy as a risk-off trigger.
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