- A former BOJ official said that there is no plan to increase rates this year because the central bank aims to regain stability in the market rather than continue its steep monetary policy.
- The recent rate hike made USD stronger and led to a reversal of yen carry trades, putting pressure on risky assets like Bitcoin as its price plunged.
- Some of the BOJ officials say that future interest rate decisions will be closely linked with market signals.
Japan recently held its key interest rate at 0.025%, which was the first time that the Bank of Japan (BOJ) has increased it since 2000. Twenty-five percent from a zero intra-organizational technology transfer range.This shifted the dynamics of global markets, such as cryptocurrency, as investors processed this change. However, while indicating that more tightening may still be possible in the future, a former BOJ official has commented that the central bank may refrain from increasing rates again in the current year in a bid to maintain market stability.
Makoto Sakurai, the former BOJ board member, stated that the central bank is going to raise the rates less in the coming months. “They won’t be able to hike again, at least for the rest of the year,” Sakurai said, pointing at the BOJ’s conservative attitude toward further worsening inflation expectations. Its implications make it possible to assume that the central bank will not risk various actions that would lead to an increase in the existing instabilities in the financial markets.
Impact of the Recent Rate Hike and Future Rate Decisions
Several impacts resulted from the first increase on July 31, the beginning of the tightening of the financial market. The Japanese yen was appreciated, thus eliminating the yen ‘carry-trade,’ which is widely regarded as a ‘risk-on’ strategy.
This unwinding process put pressure on traditional risk assets such as Bitcoins, which dropped from a trading price of about $ 65000 to $ 50000 within a week. The cryptocurrency market is highly volatile and susceptible to global economic fluctuations, so the change in policy at the BOJ triggered a proportional response.
Subsequent to the market shifts, BOJ Deputy Governor Shinichi Uchida appears more conservative, adding that any future rate hikes will depend on market signals. Uchida also advocated that monetary policy should not make further changes until markets become more stabilized. Sakurai expressed the same sentiment, pointing out that although the BOJ is gradually ceasing the policy of monetary expansion, it still cares about possible changes and the message it conveys to the markets.
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