Crypto Market Braces for Impact as BOJ Signals Further Rate Cuts Despite Yen Crash

The crypto market has been on edge as more information has come to light concerning the economic meeting held at the BOJ. The minutes suggest that the central bank could make further cuts in interest rates, even with the Yen crashing as a result of the last cut.

Crypto Market Waits as BOJ Minutes Suggests More Rate Cuts

The most recent reports about the meeting of the Bank of Japan in December have stressed that interest rates may continue to rise. Some members said that Japan’s interest rates are highly abnormal and that this has had effects on the falling value of the yen and the inflation rate.

One of the board members also highlighted that Japan has the lowest real policy rate among the biggest economies.

“Japan’s real policy interest rate is by far at the lowest level globally,” they said. “It is appropriate for the bank to adjust the degree of monetary accommodation.” 

As pointed out, currency fluctuations are progressively having an impact on domestic prices and the crypto market. The bank is now currently discussing the stability of exchange rates.

Recently, the bank raised its main interest rate to 0.75% at its last meeting. This is the highest it has been in thirty years. Some board members believe that current rates are still lower than what they should be when adjusted for inflation. Some suggested there should be more rate increases in the coming months.

“Timing the increase in the policy rate might mitigate future pressure to inflation and thus keep long-term interest rates lower,” said another board member.

Economists forecast another increase in the coming six months, and the terminal rate is projected between 1.25% and 1.50% in 2027.

Recently, this decision has happened at the same time as the sharp fall of the Japanese yen, which is now at multiple-decade lows. The fact that it has been falling in value has come as a surprise to many analysts. 

This comes as the central bank has been trying to implement a normalized interest rate structure in a situation that saw zero interest rates just a few years back.

Why Does this Matter to the Crypto Market?

Investors often borrow at interest rates that are generally low. They invest the funds in other assets that provide higher returns. Such assets include crypto.

However, with the rising yields in Japan, it is expected that some investors who have used the yen as leverage may begin to unwind their leveraged positions. Analysts have predicted that if the cost of borrowing continues rising, many investors will retreat from risk assets. This could lead to more volatility in the crypto market.

This can be seen in past trends. Bitcoin has fallen many times followingchanges in Bank of Japan policies. It fell by over 20% after rate decisions in March and July 2024. The rate hike in January 2025 also led to a fall of more than 30%.