Yeliz Akmaca 
The crypto market has come under renewed pressure following the latest Bank of Japan (BOJ) meeting minutes. Despite the yen’s sharp decline, signals of monetary tightening remain, directly affecting risk appetite. This development has prompted investors, especially those with leveraged positions, to seek a new equilibrium.
Why Is the Bank of Japan Persistent in Its Rate Policy?
The December BOJ minutes revealed a notable division among board members regarding interest rates. Some emphasized that Japan’s current policy rate remains abnormally low by global standards. Additionally, the low-rate environment has increased pressure on the yen and affected inflation transmission.
In the latest meeting, the central bank raised its main policy rate to 0.75%, the highest in 30 years. Yet, when adjusted for inflation, some board members still consider it insufficient. Consequently, additional rate hikes in the coming months may be inevitable.
One member noted, “Timing interest rate increases appropriately can limit long-term inflationary pressures.” This reflects a more controlled yet decisive approach to policy normalization.
Yen Depreciation and Market Balance
Despite rate hikes, the Japanese yen has dropped to multi-decade lows, creating an unexpected conflict for markets. Typically, higher interest rates support the currency, but capital outflows have remained dominant.
BOJ officials acknowledged that currency fluctuations are increasingly impacting domestic prices. As a result, exchange rate stability has become an indirect policy objective. However, short-term volatility could rise as rates continue to adjust.
Most economists expect another rate step within six months, with the terminal rate projected to reach 1.25–1.50% by 2027.
Why This Matters for the Crypto Market
Global investors have long used the yen for low-cost borrowing, channeling funds into higher-yielding assets such as cryptocurrencies. Rising rates could reduce the attractiveness of these carry trades.
In such a scenario, the unwinding of leveraged positions may accelerate, triggering sharp crypto price swings. Historical data shows that BOJ decisions have previously led to significant Bitcoin declines.
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After the March and July 2024 decisions, BTC fell over 20%
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The January 2025 rate hike caused a drop exceeding 30%
Thus, BOJ policy signals remain closely watched by crypto investors. Future volatility will likely be highly sensitive to the central bank’s next moves.
The upcoming BOJ meeting will be critical in determining the yen–crypto correlation.
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