Bank of Japan Decides to Pause Rate Hike Amid Global Market Meltdown

In another stimulus to the global equity market, the Bank of Japan’s governor Shinichi Uchida said that the central bank might consider pausing its interest rate hike decision if they see major instability in the markets. The Nikkei 225 Index surged by another 2.5% after the statement shooting past 35,000 levels. Besides, the crypto market also showed strength with the Bitcoin price reversing losses.

Nikkei Surge As BOJ Fuels Optimism

With surge past 35,000, Nikkei has recovered almost all of the losses from the black Monday’s market crash on August 5. As the Bank of Japan announced its 25 bps rate hike last week, the unwinding of Yen carry trades sent shockwaves across the global market bringing the markets on the brink of triggering a US recession.

BOJ governor Shinichi Uchida’s intervention comes at the right time bringing some reassurance to the markets. This flexible approach from the BOJ has helped to curb market uncertainty with traders evaluating whether the recent global sell-off was an overreaction to the weak US economic data. Charu Chanana, head of currency strategy at Saxo Markets said:

“Uchida-san’s comments can bring some stability to the Japanese equity market for now, but it cannot take the focus away from US economic data and recession concerns. Putting in fresh carry trades remains tough in this environment of higher volatility and nervousness about the US economy.”

However, the central bank hasn’t cleared whether it plans another rate hike next year. The Yen carry trades could result in second wave of crypto market crash.

Crypto Market Recovery Further?

The crypto market recovered sharply with Bitcoin and other altcoins bouncing back more than 10% after the Bank of Japan statement. The altcoins market saw an even stronger recovery with ETH, SOL, etc gaining by more than 15%.

Market analysts noted that the Bitcoin price rally can extend to above $60,000 as global stock markets recover. CryptoQuant analyst Ki Young Ju wrote that as long as BTC sustains above $45,000, it can still rally to a new all-time high within a year’s time.

On the other hand, the Ethereum ETFs have seen strong inflows led by BlackRock’s ETHA. This shows that the institutional interest in ETH persists despite the recent crash.

However, Bitcoin is dropping after hitting $61,000 level. BTC price is currently trading at $58,489, down 4% in the last 24 hours.