Crypto Market on Edge As BoJ Follows US Fed on Interest Rate Cuts

The global crypto market is bracing for impact after the Bank of Japan decided to hold interest rates steady, following a similar move by the US Federal Reserve. The BOJ held its benchmark interest rate at approximately 0.5% after a two-day meeting, mirroring the US Federal Reserve’s decision to keep rates steady for a fifth time. Is a downturn looming in the crypto market?

Bank of Japan Maintains Status Quo on Interest Rates

According to a recent Reuters report, the Bank of Japan maintained steady interest rates and expressed cautious optimism about the economy, as expected. This move comes in response to the recent Tokyo-Washington trade deal that reduced uncertainty around Japan’s fragile recovery.

It is noteworthy that the rate-holding decision was unanimously approved. Tohru Sasaki, Chief Strategist at Fukuoka Financial Group, stated that the central bank’s CPI forecast revision to 2026 shows a modest increase. This suggests lingering concerns about inflation. Sasaki added,

If we think about the level of the inflation rate, the BOJ can be hawkish. The BOJ can hike interest rates anytime soon. But still the BOJ continues to be cautious on global risks, especially the tariff policy from the United States. And actually, between Japan and the U.S., their understanding of the tariff agreement is totally different. So there’s still uncertainty over the trade talks between Japan and the U.S.

During the meeting, the BOJ stated that it would continue to raise the policy rate if the economy and prices evolve in line with its forecasts. However, it noted high uncertainty surrounding trade policy developments and their potential impact on the economy. In response to potential US tariff impacts, Japan has unveiled a $6.3 billion relief package, which could boost the crypto market.

In addition, the central bank assessed that risks to the inflation outlook are roughly balanced, with inflation expectations rising moderately. It also acknowledged that real interest rates are at extremely low levels. The BOJ pledged to conduct monetary policy as appropriate to sustainably and stably achieve its 2% inflation target.

Fed Keeps Rates Unchanged at 4.25-4.5%

As CoinGape reported recently, the US Fed at FOMC meeting has announced its decision to hold its interest rate unchanged at 4.25-4.5%. This is the fifth straight meeting where the Committee has chosen to maintain steady interest rates, following the January, March, May, and June meetings.

Reportedly, nine members voted in favor of maintaining current rates, while two dissented. Governors Christopher Waller and Michelle Bowman were the dissenting voices, advocating for a 25-basis-point rate cut, as CoinGape reported.

Is a Bearish Crypto Market Ahead?

Currently, the crypto market is in the green zone, with the total market cap at $3.89 trillion, up 0.76%. Although top cryptocurrencies like Bitcoin, Ethereum, and XRP haven’t experienced significant falls over the past day, they have shown signs of a downtrend.

Bitcoin, currently trading at $118,415, slipped to a low of $116,000 earlier today. Ethereum hit a daily low of $3,691 following the BOJ’s interest rate decision. However, the ETH price is currently at $3,860, up 1.43%. Meanwhile, XRP, trading at $3.14 at press time, reached a six-day low of $3.022.

Nick Ruck, director at LVRG Research, stated, “If the Fed maintains its cautious stance, the bull market’s pace may slow, but the underlying liquidity surge could keep the floor intact for an eventual rebound.”

Meanwhile, Henrik Andersson, Chief Investment Officer at Apollo Capital, expressed optimism, noting that a bearish trend is unlikely. He noted,

The market had priced in that there would be no rate cut this week, so this is no surprise…We don’t think this will have a material effect on the crypto market; it’s been clear for a while that the uncertainty regarding tariffs will delay US rate cuts.

In conclusion, the recent decisions by the BOJ and the US Fed to hold interest rates unchanged have introduced a mix of caution and optimism into the global crypto market. Given the ongoing uncertainties surrounding trade policies and inflation, the crypto market may experience continued volatility. However, with the BOJ and Fed’s cautious yet optimistic outlook, a severe downturn may be unlikely.