Bank of Japan raises interest rates by 25 basis points. Bitcoin tops $77,000

The Bank of Japan (BOJ) raised its benchmark interest rate by 25 basis points on Friday, lifting it to 1.25%, the highest level in 31 years, as it battles sticky inflation and a chronically weak yen.

The BOJ said it acted because of risks that inflation would move above its 2% target, driven by rising import costs and energy prices.

The move marks the central bank’s second hike in three months and comes weeks after U.S. Treasury Secretary Scott Bessent publicly pressed Tokyo to tighten faster to support yen. He argued that an orderly yen market benefits Treasury market stability and defended the coordinated yen-buying intervention as serving U.S. interests.

The bitcoin-Japanese yen pair (BTC/JPY) listed on Tokyo-based bitFlyer exchange extended gains by a 0.5% to JPY 12.06 million following the BOJ rate hike. BTC’s dollar-denominated price jumped to $77,400, extending the rebound from the overnight low of $76,200, data from CoinDesk show.

The Japanese yen depreciated against the U.S. dollar, lifting the USD/JPY pair to 156.70 from 156.20.

BOJ rate decisions and yen movements are said to have a bearing on world markets, thanks to a prolonged period of near‑zero interest rates in Japan over the past decade or more that led traders to borrow in yen to fund higher‑yielding investments elsewhere.

Observers have long feared that an unwinding of this so‑called carry trade could drag all markets down. The mini‑crash in equities and Bitcoin in early August 2024 supposedly offered a glimpse of that risk.

Those fears, however, seem overblown because even after the latest 25‑basis‑point hike, Japanese interest rates remain far below U.S. rates, preserving a wide yield gap that keeps yen‑funded carry trades attractive.

Early this week, the Federal Reserve raised its benchmark interest rate by 25 basis points to a target range of 3.75%-4.00%, marking its first hike since 2023. Investment banks, such as Goldman Sachs and Morgan Stanley, now expect the Fed to raise rates against in October.

03:32 UTC: Adds a line on BOJ’s inflation outlook and yen carry trades