BOJ Raises Benchmark Rate to 1%, Bitcoin Barely Reacts as Move Was Priced In

The Bank of Japan raised its benchmark interest rate to 1%, but the move had little impact on Bitcoin and the broader crypto market, according to market analysis. Last year, a BOJ rate increase stoked fears of a yen carry trade unwind and helped trigger a sharp drop in Bitcoin. This time, the market had already largely priced in the decision.

Cointelegraph Markets Research wrote on X on June 16 that the BOJ raised its policy rate by 25 basis points to 1.0% that day, but the crypto market “didn’t care this time.” That is the highest level since September 1995.

After the BOJ increase, Japan’s Nikkei 225 rose above 70,000 for the first time, the dollar-yen exchange rate held above 160, and Bitcoin traded near $66,000 with little volatility.

The reaction differed from last year. In August 2024, an unexpected rate increase of the same size dragged Bitcoin down from $65,000 to $50,000 in a week, Cointelegraph Markets Research said.

The report gave four reasons the latest shock was limited. First, the rate hike had already been priced in. Ahead of the BOJ meeting, Polymarket showed a 98% to 99% chance of an increase, according to Cointelegraph Markets Research.

Pressure from yen carry trades was also lower than a year earlier. In 2024, a rapid unwind in hedge-fund-led short yen positions amplified the market shock. Net short yen positions, which were about 180,000 contracts at the time, fell back to neutral within five weeks. Short yen positions remain high at 145,000 contracts, but hedged carry trades have already faced adverse conditions since mid-2022, the report said.

Another reason was that Bitcoin had already fallen sharply. Cointelegraph Markets Research said Bitcoin was down about 50% from its peak in October last year, while $4.4 billion flowed out of spot Bitcoin exchange-traded funds over the past 13 trading days, unwinding much of the market’s leverage.

The report also pointed to deeply negative real interest rates. Carry trades have not disappeared, but they are no longer the marginal force setting Bitcoin prices.

Market participants still view BOJ tightening as a short-term variable. But because the outcome of this meeting was widely expected, its effect on crypto assets was limited. Even so, short yen positions remain elevated, leaving room for volatility in risk assets to pick up again if the BOJ steps up the pace of further tightening.