Bitcoin rebounds after Bank of Japan hikes rates to 31-year high

Bitcoin Recovers From Early Losses After Bank of Japan Hikes Rates to 31-Year High

The Bank of Japan raised its benchmark interest rate by 25 basis points to 1% on Tuesday, marking the highest level since 1995 and the central bank’s continued march toward policy normalization. Bitcoin initially slipped during the Asian session before reversing course and climbing back above $66,000, defying a historical pattern of sharp declines following BOJ rate increases.

A Hawkish Move With a Dovish Twist

The decision, made with a 7-1 vote during the BOJ’s two-day meeting, was widely anticipated after 94% of economists polled by Reuters predicted the move. Board member Toichiro Asada was the sole dissenter, advocating for rates to remain at 0.75%. Governor Kazuo Ueda, who was hospitalized for treatment of a hepatic cyst infection, did not attend or vote — a first for a regular BOJ policy meeting — but submitted his views in writing.reuters

The rate hike represents the first increase since December 2025 and aligns the BOJ with other central banks tightening policy to combat inflation, particularly from energy price pressures linked to the Middle East conflict. However, the central bank’s decision to halt the reduction of its bond purchases appeared to soften the hawkish signal, which analysts credited for Bitcoin’s rebound.wsj

Carry Trade Fears Meet Market Reality

Heading into Tuesday’s decision, crypto analysts had warned that every BOJ rate hike since March 2024 had triggered Bitcoin drawdowns ranging from 18% to 32%. The concern centered on the yen carry trade — a strategy of borrowing cheaply in yen to invest in higher-yielding assets — which speculators had pushed to nine-year highs in bearish yen positions.beincrypto

Yet Bitcoin rose from roughly $65,000 to $66,000 after the announcement as the yen weakened rather than strengthened, easing immediate fears of a forced carry-trade unwind. The muted reaction stood in contrast to the broader selloff that had already pushed Bitcoin below $60,000 earlier in June amid separate concerns about Strategy’s asset sales and a strong U.S. jobs report.cnbc

What Comes Next

Reuters polling indicates economists expect the BOJ to raise rates further to 1.25% by year-end, while the Coingabbar analysis noted markets are pricing in one to two additional hikes in 2026 with a possible terminal rate around 1.25% to 2%. Whether Bitcoin’s resilience on Tuesday marks a break from its historical pattern of post-BOJ weakness — or merely a delayed reaction — remains the central question for crypto traders navigating an increasingly hawkish Japanese monetary environment.reuters