• The Bank of Japan raised its key interest rate by 25 basis points — to 1%.
• This is the highest rate level in the country since 1995.
• The decision matched market expectations.
• Despite the tighter monetary policy, bitcoin did not show a sharp reaction.

Following its monetary policy meeting, the Bank of Japan (BoJ) raised its short-term interest rate by 25 basis points — from 0.75% to 1%. This is the highest level of the indicator in the past 31 years.

The decision matched market participants' forecasts.

The Fed doing the splits, or two chairs for Warsh: what is happening with the US economy and how it threatens cryptocurrencies 11.06.2026 Read

The highest rate since 1995

The hike came amid rising global energy prices and intensifying inflationary pressure. The Bank of Japan has been gradually normalizing monetary policy since March 2024, when it raised the interest rate for the first time in 17 years, ending the era of ultra-loose monetary policy, the BBC emphasized.

"After twenty years of deflation, Japan has now entered a new inflationary cycle," said economist Jesper Koll.

According to him, emergency anti-crisis measures are no longer necessary, and the central bank seeks to return to conventional monetary policy.

What is the carry trade and how does it work? 09.10.2024 Read

At the same time, the central bank signaled its readiness to continue raising interest rates, Reuters believes. The regulator presented a somewhat more optimistic forecast for economic growth and inflation, expressing confidence that Japan is gradually approaching the sustainable achievement of the 2% inflation target, primarily thanks to wage growth, the statement says.

Bitcoin's reaction

Amid the announcement of the interest rate level in Japan, bitcoin did not show any sharp movements. The asset is trading near the $66,300 mark:

CoinDesk noted that although rate hikes are traditionally considered a negative factor for risk assets, including cryptocurrencies, the price of bitcoin did not show sharp fluctuations after the Bank of Japan's decision.

According to journalists, the BoJ's many-year policy of ultra-low rates was one of the factors that supported the growth of global stock markets and risk assets. 

At the same time, the positive reaction of cryptocurrencies was likely related to another decision by the regulator — to pause the wind-down of the quantitative easing (QE) program, the statement says.

Note that QE is a central bank strategy of buying government bonds and injecting liquidity into the economy to lower rates and stimulate consumption during difficult financial periods.

However, despite the relatively modest volatility, the volume of liquidations on the crypto futures market rose sharply. According to CoinGlass, over the past 24 hours the total amount of forcibly closed positions exceeded $535 million.

The liquidations affected more than 111,000 traders. Long positions accounted for about $160 million, while short positions accounted for $375 million. The biggest losses were suffered by market participants who traded pairs with bitcoin and Ethereum — approximately $130 million and $197 million respectively.

Source: Incrypted