On Friday, the BOJ increased its benchmark interest rate by 25 basis points, pushing it to 1.25%, which is the highest level seen in 31 years. Bitcoin climbed above $77,000, and the yen fell against the dollar, with BTC’s dollar-denominated price rising to $77,400, per CoinDesk data.
The Rate Hike
Japan’s central bank raised interest rates again, its second hike in three months, following expectations. The decision came shortly after U.S. Treasury Secretary Scott Bessent pushed Tokyo to tighten monetary policy more quickly to help the yen. Bessent said a well-ordered yen market supports Treasury market stability and defended the coordinated yen-buying intervention as serving U.S. interests.
The central bank said it acted because of risks that inflation would move above its 2% target, driven by rising import costs and energy prices.
What Moved First
After the rate hike, the bitcoin-Japanese yen pair (BTC/JPY) listed on Tokyo-based bitFlyer exchange added gains of 0.5% to reach JPY 12.06 million. In dollar terms, BTC’s price climbed to $77,400, pushing past the overnight low of $76,200.
The USD/JPY pair rose to 156.70 from 156.20, because the Japanese yen declined against the U.S. dollar.
Carry Trades and the Past Decade
World markets are influenced by BOJ rate decisions and yen movements due to a prolonged period of near-zero interest rates in Japan, which encouraged traders to borrow in yen to finance higher-yielding investments overseas. This borrowing strategy, referred to as the carry trade, has had a lasting impact on global markets for years.
What an unwind could look like was on display during the early-August pullback in both equities and Bitcoin 2024.
Why the Carry Trade Holds
The concerns appear excessive. After the most recent increase of 25 basis points, interest rates in Japan still sit well beneath those in the United States, maintaining a large gap in yields that keeps yen-backed carry trades appealing.
The Federal Reserve’s Move
This week, the Federal Reserve increased its benchmark interest rate by 25 basis points, setting it within a target range of 3.75%-4.00%. That marks the first time the central bank has hiked rates since 2023. Goldman Sachs and Morgan Stanley are among the investment banks now predicting another rate increase from the Fed in October.
Key Facts Box
- BOJ benchmark rate: 1.25%, up 25 basis points
- Highest level in 31 years
- BTC topped $77,400
- USD/JPY reached 156.70
- Fed target range: 3.75%-4.00%
Comparison Table
| Currency Pair | Direction |
|---|---|
| BTC/JPY | Up 0.5% |
| USD/JPY | Up |
| BTC (dollar-denominated) | Up |
The yen’s decline against the dollar and bitcoin’s surge arrived together. The BOJ moved first, and the markets followed.
Source material: “Bank of Japan raises interest rates by 25 basis points. Bitcoin tops $77,000,” CoinDesk.
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