Crypto Climbs as Bank of Japan Holds Rates, Focus Shifts To Fed

• The Bank of Japan held interest rates steady at 0.50%, as expected.
• The yen weakened to 149.79 per U.S. dollar following the decision.
• Crypto markets reacted positively, with Bitcoin and Ethereum posting gains.
• Investors now turn to the Federal Reserve’s upcoming policy decision.

The Bank of Japan (BoJ) kept its key interest rate unchanged on Wednesday, maintaining its monetary policy as it assesses inflationary pressures and economic conditions.

The widely expected move sent the yen lower, reversing some of its recent strength, while risk assets, including cryptocurrencies, saw renewed interest.

Now, all eyes shift to Washington, where the Federal Reserve is set to announce its latest monetary policy decision.

Market observers are watching for signals on potential rate cuts amid mixed economic data.

Bank of Japan Stays the Course

The BoJ unanimously voted to keep its short-term interest rate target at 0.50%, maintaining its stance on supporting economic growth despite signs of rising inflation.

Policymakers reaffirmed their commitment to the “virtuous” wage-price cycle, suggesting that further tightening remains on the table in the coming months.

While Japan’s economy is projected to grow above potential, BoJ officials warned that global uncertainty—particularly from ongoing U.S. trade disputes—could dampen sentiment.

The central bank also reiterated its view that underlying inflation will likely align with its price targets within the next three years.

Crypto Gains as Yen Weakens

Asian equities showed mixed reactions following the BoJ’s decision, while gold held near record highs amid lingering economic concerns.

However, the biggest immediate impact was seen in foreign exchange markets, with the yen sliding to 149.79 per U.S. dollar.

Despite the BoJ’s cautious approach, expectations of a future rate hike have helped the yen appreciate 5% against the dollar this year.

Still, the currency retreated following the central bank’s latest announcement as investors recalibrated their expectations.

Meanwhile, cryptocurrencies saw fresh inflows, likely as traders sought alternative assets amid the yen’s weakness.

The global crypto market cap rose by 1.0% to $2.72 trillion. Bitcoin (BTC) climbed 1.0% to $83,172.27, Ethereum (ETH) gained 2.2% to $1,936.20, and XRP jumped 2.4% to $2.28.

BoJ’s Next Move and Market Outlook

Analysts anticipate that the BoJ could raise interest rates as early as June, with HSBC’s Chief Asia Economist Fred Neumann suggesting that an earlier hike remains a possibility.

“June looks more likely. The market is a little bit after that; July is probably what the market is thinking right now. We think a little bit earlier in June,” Neumann said.

FXStreet analysts noted that a more hawkish BoJ stance could push the USD/JPY pair lower, with key support levels around 147.41 and 147.00. A sustained break below those levels could see the yen strengthening to a five-month high of 146.54.

On the upside, dollar bulls will look for a decisive move above the psychological 150.00 mark, potentially extending gains toward the March high of 151.31. The 200-day simple moving average at 151.93 remains a key resistance level.

Fed Decision Looms

Attention now turns to the Federal Reserve, which is expected to keep rates unchanged at its meeting later today. Chair Jerome Powell and his colleagues have signaled a cautious stance, emphasizing that there is no immediate urgency for rate cuts.

The market will closely analyze the Fed’s economic projections and Powell’s commentary for any shifts in tone, particularly regarding inflation and labor market conditions.

Any indication of prolonged higher rates could weigh on risk assets, while hints of future easing might provide further tailwinds for cryptocurrencies.

With monetary policy in flux across major economies, crypto markets continue to serve as a barometer for investor sentiment, responding dynamically to shifts in traditional financial markets.