Following its monetary policy meeting on September 17–18, the Bank of Japan raised its policy rate by 25 basis points to 1.25%. This marks the second rate hike in three months and pushes Japan’s borrowing costs to their highest level since 1995. After the announcement, market sentiment remained stable, with Bitcoin holding above $77,000.
The vote resulted in a 7 to 2 decision.
The Bank of Japan's board approved the rate hike decision by a 7-to-2 vote. Two members opposed the hike, weakening market expectations of faster future policy tightening.
The Bank of Japan is still addressing price pressures. The report noted that Japan’s core consumer inflation rose 1.7% year-over-year in August, with energy costs and a weaker yen continuing to exert upward pressure on prices.
The Japanese yen did not strengthen in response to the rate hike.
Despite the Bank of Japan's interest rate hike, the yen did not strengthen following the announcement. The USD/JPY pair rose as high as 157.145, indicating that the yen fell as much as 0.8% on the day.
This rate hike followed the Federal Reserve's 25-basis-point increase in its benchmark rate and an earlier hike by the European Central Bank this month. While several major central banks have continued to maintain a tight stance, the Bank of Japan's decision did not trigger significant selling of assets tied to yen carry trades.
Bitcoin remains elevated.
Following tighter monetary policies in Japan and the United States, the crypto market has not shown significant pressure. Bitcoin continues to trade above $77,000, with the global crypto asset market cap at approximately $2.73 trillion.
On the funding side, Bitcoin spot ETFs recorded approximately $159 million in net inflows on September 17, providing support to the market ahead of the Bank of Japan's decision.
Next, the market will focus on remarks by Bank of Japan Governor Kazuo Ueda to assess whether the subsequent interest rate path will remain gradual.