Bitcoin Falls as Bank of Japan Hikes Interest Rates to 31-Year High of 1%

Bitcoin price came under selling pressure on Tuesday as the Bank of Japan (BOJ) raised its interest rates by 25 bps to 1%, the highest level since 1995. The widely anticipated move marks Japan’s shift away from decades of ultra-easy monetary policy.

The decision comes amid ongoing concerns about inflation driven by a weak yen and elevated energy costs tied to the US-Iran war. The BOJ plans to keep raising interest rates in response to the economy and costs.

Bitcoin has recorded a sharp 20%-30% selloff after the last four BOJ rate hikes. Bitcoin could tumble due to carry trades unwinding in case the yen strengthens.

Bank of Japan Raises Interest Rate by 25 Bps

The Bank of Japan (BOJ) lifted its interest rates from 0.75% to 1.0%, aligning with market expectations. This marked the bank’s 5th rate hike amid the normalization push since ending negative rates.

The decision was made by a 7-1 vote, with Governor Kazuo Ueda missing the meeting and not voting due to hospitalization. All eyes are now on any hints Deputy Governor Shinichi Uchida could drop on the pace and timing of future rate hikes.

“The price pass-through stemming from rising crude oil prices has been progressing at a relatively fast ​pace in business-to-business transactions, which could spread to an increase in consumer prices across a wide range of items,” the BOJ said in a statement announcing the decision.

However, Yen weakened against US dollar and is currently moving near 160.29. The Bank of Japan will also reduce its government bond purchases from April 2027 onward.

Meanwhile, the central bank will continue to buy roughly ‌2 trillion yen ($12.5 billion) in Japanese government bonds (JGB) per month.

BOJ: TO BUY BONDS AT MONTHLY PACE OF 2 TRLN YEN FROM APRIL 2027

Tapering https://t.co/KJLVwPvf97

— zerohedge (@zerohedge) June 16, 2026

Bitcoin Limits Fall amid Yen Weakening and Iran Deal

Bitcoin slips as the Bank of Japan’s interest rate hike disrupted the yen carry trade. In this, investors borrow cheaply in yen to buy high-yield assets such as U.S. stocks, bonds, and crypto. Yen carry trade unwinding has historically drained global liquidity and weighed on risk assets.

Notably, past BOJ hikes since 2024 have often triggered a 20-30% Bitcoin crash in the following weeks. However, Yen’s weakening against the US dollar and the US-Iran peace deal have kept Bitcoin from plunging further.

Bitcoin fell more than 1% to after the Bank of Japan rate hike, extending the drop to more than 2% in the past 24 hours. The price currently trades at $65,827, with a 24-hour low and high of $65,468 and $65,828, respectively.

Traders are closely watching the FOMC meeting as the Fed is expected to keep interest rates stable under Kevin Warsh’s first FOMC meeting as the new Fed Chair.