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.

• After the March and July 2024 decisions, BTC fell over 20%

• 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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New Whales’ High Cost Basis 

Firstly, the cost basis of new Bitcoin whales is approximately $91,900. This reflects the average acquisition price of short-term holders (STH) who have purchased over 1,000 BTC ($103.3 million) in the last 155 days. In contrast, the cost basis of long-term holders (LTH) is much lower. This disparity shows that new whales are entering the market at high prices. Moreover, it suggests that new investors taking positions above the current Bitcoin price may face unrealized losses. However, the confidence of these whales in the market could also reflect a long-term bullish outlook. 

Market Dynamics and Investor Behavior 

Additionally, on-chain data provides important clues for understanding investor behavior in the Bitcoin market. The Realized Price indicator, which measures the average cost basis of investors, sheds light on the overall market condition. Currently, the high cost basis of short-term whales indicates new capital inflows into the market. This proves that interest in Bitcoin persists and new players are taking positions despite high prices. On the other hand, the low cost basis of long-term whales shows that they are in profitable positions and contribute to market stability. These dynamics create an important foundation for Bitcoin’s future price movements. 

Furthermore, analysts view Bitcoin’s trajectory above $100,000 positively. Investtech notes that the upward trend continues in the short and medium term, though a reaction may occur at the $105,500 resistance level. On-chain data reflects new capital inflows and whales’ confidence in the market. 

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