Bitcoin (BTC) tore through resistance at $88,000 Friday, rallying over 2.5% immediately after the Bank of Japan (BOJ) raised its short-term policy rate to 0.75%, its highest level since 1995. While a rate hike typically tightens liquidity, markets reacted with relief as Governor Kazuo Ueda signaled that real interest rates would remain “significantly negative,” effectively greenlighting continued risk-taking.
The “Sell the Rumor” Reversal
The policy board voted unanimously to hike rates by 25 basis points, a move fully priced in by bond markets. Instead of strengthening, the Japanese Yen (JPY) weakened, with USD/JPY popping above 158.00 immediately following the release. This counter-intuitive reaction suggests the “Yen carry trade” unwinding fears that plagued crypto markets earlier this year have dissipated.
It is highly likely that the mechanism where both wages and prices will moderately increase will be maintained. — BOJ Governor Kazuo Ueda
Traders interpreted the unanimous vote and Ueda’s dovish forward guidance as a signal that the normalization cycle will be slow and non-disruptive. Bitcoin, which had languished below $86,000 prior to the announcement, surged on the liquidity signal, forcing shorts to cover as the Yen’s slide made dollar-denominated assets more attractive.
Macro Context: Real Rates Stay Negative
Despite the nominal hike, Japan’s inflation, hovering near 2.9%, means real borrowing costs remain deeply negative. This ensures that the Yen remains a cheap funding currency for global risk assets, including crypto. With the event risk cleared and the BOJ committing to accommodative conditions, the path of least resistance for BTC flipped to the upside.
