Bank of Japan Holds Rates Steady: How Carry Trade Can Fuel Bitcoin Price

• The Bank of Japan has opted to keep interest rates unchanged, prioritizing a cautious approach amid global economic uncertainty.
• The majority of policymakers expressed concerns over the potential impact of U.S. economic policies.
• The BOJ’s decision to maintain low interest rates has different implications for the Japanese yen and Bitcoin.

The Bank of Japan (BOJ) maintained its ultra-loose monetary policy, keeping interest rates unchanged.

Despite growing inflationary pressures, the central bank opted for caution, citing uncertainty surrounding U.S. economic policies.

The decision could have implications for Bitcoin, as it may further fuel the cryptocurrency’s appeal as a hedge against fiat currency devaluation.

Bank Of Japan Keeps Rates Unchanged

The Bank of Japan held its key interest rate steady at 0.25%, prioritizing a cautious approach amid global economic uncertainty.

While one board member dissented, calling for a rate hike to address inflationary risks, most policymakers expressed concerns over the potential impact of U.S. economic policies.

BOJ Governor Kazuo Ueda reiterated the bank’s commitment to gradually normalizing monetary policy if economic conditions permit.

However, he emphasized the need for additional data, particularly regarding wage growth, to solidify the case for a rate hike.

“Taken together, the likelihood of Japan’s economy moving in line with our forecast is heightening,” he said.

“But we’d like one notch more information to believe we can raise interest rates. That includes the sustainability of wage increases,” Ueda added.

Domino Effects On Yen And Bitcoin

Arthur Hayes , co-founder of cryptocurrency exchange BitMEX, explained how economic conditions in Japan affect Bitcoin.

Hayes suggests that low interest rates in Japan create a favorable environment for the “carry trade,” a strategy that involves borrowing a low-interest currency, such as the yen, to invest in higher-yielding assets.

If the yen depreciates, the debt becomes cheaper to repay, benefiting investors.

According to Hayes, this makes Bitcoin attractive to those seeking higher returns and protection against economic instability.

“Bitcoin is the best-performing asset in the face of global fiat debasement, and they know it,” Hayes said.

“When something is done about the weak yen, I will mathematically guestimate how flows into the Bitcoin complex will ratchet the price to $1 million and possibly beyond. Stay imaginative, stay boolish, now is not the time to be a cuck.”

Bitcoin Reaction to BoJ and Fed Moves

On the other hand, the U.S. Federal Reserve cut its rates for the third time this year by another 25 basis points.

Fed Chair Jerome Powell revealed that the central bank is legally barred from owning Bitcoin, dampening hopes for a strategic Bitcoin reserve.

However, Bitcoin decreased after Powell’s words and after the BoJ’s decision to maintain rates at their current levels.

At the time of writing, the king of cryptocurrencies was down by 2.0% to $102,351.06, remaining 5.7% under the record high hit two days before.