Key Takeaways
Bitcoin (BTC) fell 2.5% to $67,850 on Tuesday after the Bank of Japan held its short-term policy rate at 0.75% but revealed the most divided vote of Governor Kazuo Ueda's tenure.
"Three dissents is shocking," said David Chao, global market strategist for Asia-Pacific at Invesco in Singapore. "The BOJ is sending a signal here – expectations for a rate hike in June have certainly increased. The time of the cheap yen may be coming to an end."
The 6-3 vote to hold rates saw three of the nine-member board break ranks to call for an immediate hike to 1.0%, a hawkish tilt that sent the yen firming to 159.02 per dollar. The move sparked immediate concern among traders who have for years used the ultra-low-yielding yen to fund purchases of higher-yielding assets, including cryptocurrencies. In its quarterly outlook, the BOJ also sharply revised up its core inflation forecasts for the fiscal years ending March 2027 and 2028.
This potential unwinding of the "yen carry trade" is the primary driver of the risk-off move. A strengthening yen increases the cost of repaying yen-denominated loans, forcing investors to sell other assets like stocks and crypto to cover their positions. The deleveraging process reduces global liquidity, hitting riskier assets like Bitcoin the hardest. Japanese Finance Minister Satsuki Katayama added to the tension, warning that authorities are “standing by around the clock” to take “decisive action” against excessive currency moves.
The BOJ's decision comes amid a packed week for central banks, with the Federal Reserve, European Central Bank, and Bank of England all set to deliver rate decisions. While the Fed is expected to keep rates on hold, the global policy landscape remains clouded by the ongoing war in Iran.
"With every central bank that’s meeting, they’ve all made it very clear that in the fog of uncertainty about how the war will play out as far as both inflation and growth, it’s giving them every excuse they need to sit on their hands," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
As of 08:30 UTC, the US dollar index was 0.1 percent higher at 98.51, while the euro fell 0.1 percent to $1.1713.
This article is for informational purposes only and does not constitute investment advice.
