Bank of Japan Raises Key Rate to 1.25%, Crypto Market Reacts Positively

The Bank of Japan (BOJ) raised its benchmark interest rate by 25 basis points to 1.25%, the highest level in 31 years. The hike was widely expected, and markets reacted calmly after two policymakers opposed the move, raising hopes that the BOJ may take a slower approach to future hikes. 

Despite the hike, Bitcoin calmly held above $77,000, showing no immediate pressure from Japan’s tighter policy.

BOJ Raises Rate to 1.25%

In its two-day meeting on September 17–18, the BOJ raised its policy rate to 1.25%. This was the second rate hike in three months and pushed Japanese borrowing costs to their highest level since 1995.

The BOJ board voted 7–2 on the decision, with board members Toichiro Asada and Ayano Sato opposing the hike. The central bank is facing higher price pressure as it tries to keep inflation near its 2% target.

As the Japan’s core consumer inflation rose 1.7% year over year in August, while energy costs and the weaker yen continue to put pressure on prices.

Meanwhile, BOJ Governor Kazuo Ueda is scheduled to speak at 3:30 p.m. local time. Investors will watch his comments for clues about the central bank’s next rate moves.

Yen Weakens Despite BOJ Rate Hike

The BOJ’s rate hike came shortly after the Federal Reserve raised its benchmark rate by 25 basis points to 3.75%–4.00. The European Central Bank also raised rates earlier this month.

The BOJ rate hike did not strengthen the Japanese yen, as the currency fell as much as 0.8% to 157.145 against the dollar after the decision. 

Markets reacted calmly, as the move did not trigger major selling in global assets linked to yen carry trades.

Bitcoin Holds Above $77K

Despite tighter monetary policy from both central banks, Bitcoin remained above $77,000, while the global crypto market cap stood around $2.73 trillion.

Bitcoin also recorded about $159 million in ETF inflows on September 17, helping support the market ahead of the BOJ decision.