BOJ Rate Hold Masks Rising Yen Risk for Bitcoin, Crypto

• BOJ keeps benchmark rate at 0.75% while upgrading inflation and growth forecasts.
• Yen weakness and rising bond yields increase risks for leveraged crypto positions.
• Dissenting vote signals internal pressure for faster tightening and market caution.

Japan’s central bank kept interest rates unchanged on Friday, yet the decision quietly raised fresh risks for Bitcoin and crypto markets. The Bank of Japan held its benchmark rate at 0.75% in Tokyo on January 23, upgrading inflation and growth forecasts. While prices barely moved, the vote exposed internal policy strain, yen funding risks, and growing pressure on leveraged crypto positions.

BOJ Holds Rates as Inflation Outlook Turns Firmer

The Bank of Japan maintained its benchmark rate at 0.75% in an 8-1 vote, matching market expectations. Board member Hajime Takata dissented, arguing that rates should rise to 1% immediately. He cited stronger inflation pressures and improving global economic conditions.

However, the majority chose caution as political uncertainty grows ahead of Japan’s February 8 snap election. Prime Minister Sanae Takaichi approved the dissolution of parliament the same day. As a result, the central bank faced competing pressures between monetary normalization and election timing.

Alongside the rate hold, the BOJ upgraded its economic outlook. The bank raised fiscal 2025 real GDP growth to 0.9% from 0.7%. It also lifted fiscal 2026 growth to 1.0%, citing trade support and a large stimulus package.

More importantly, inflation forecasts moved higher. Core CPI is now projected at 3.0% for 2025 and 2.2% for 2026. December headline inflation stood at 2.1%, marking 45 straight months above the 2% target.

Political Spending, Yen Weakness, and Bond Market Moves

Japan’s fiscal outlook added to the complexity. Prime Minister Takaichi centered her campaign on suspending the 8% food sales tax for two years. According to NHK, 45% of voters rank living costs as their top concern.

Her proposed $783 billion budget for the next fiscal year raised concerns about public debt. Notably, Japanese government bond yields climbed to multi-decade highs following the announcement. Japan’s 40-year bond yield fell slightly on Friday but remains elevated at 3.939%.

Meanwhile, the yen has weakened sharply. Since Takaichi took office in October, the yen has fallen 4.6% against the US dollar. On Friday, it traded near 158.54 per dollar, showing only modest strength after the BOJ decision.

Crypto markets showed a limited reaction. Bitcoin moved toward $90,000, while gold also traded higher. However, broader sentiment is cautious as US PCE inflation stayed elevated and Japan’s inflation slowed for the first time in four months.

Related: BOJ December Rate Hike to 0.75% Puts BTC Liquidity at Risk

Yen Carry Trades Keep Crypto Exposure in Focus

For years, investors borrowed low-yielding yen to fund higher-yielding assets, including cryptocurrencies. This structure, known as the yen carry trade, remains sensitive to BOJ policy shifts. So even small shifts in expectations can have real effects. Takata’s objection pointed to growing pressure inside the BOJ to raise rates sooner. At the same time, the bank’s higher inflation outlook strengthened the case for more hikes this year. Together, this drew attention to crypto trades that rely on cheap yen borrowing.

Past events make the concern more serious. In August 2024, Bitcoin fell hard when traders rushed to unwind yen-funded positions amid talk of BOJ rate hikes. That moment showed how moves in the yen can quickly force sell-offs.

For now, markets are calm. Still, policy signals are mixed. Japan’s slow move toward tighter policy clashes with Takaichi’s push for more government spending. Higher bond yields could pull money back into Japan, reducing liquidity elsewhere.

Global policy alignment is also shaky. CME FedWatch suggests the Fed will likely keep rates unchanged in January, and JPMorgan expects no US rate cuts in 2026 after strong economic data. This leaves crypto markets caught between higher yen funding costs and firm global interest rates.

The BOJ’s decision to hold rates masked deeper shifts. Higher inflation forecasts, internal dissent, fiscal expansion, and a weaker yen all point to growing risk. Even though prices haven’t moved much yet, Japan’s policy direction remains a key influence on Bitcoin and the wider crypto market.