As speculation spreads today that the Bank of Japan has implemented an additional rate hike, the market is seeking to assess whether yen appreciation will resume and how the move will affect the bitcoin market. Attention is also focused on developments after the US FOMC, with a double price movement expected.
At today’s BOJ meeting, the market consensus is that the policy rate will be raised by 0.25% to 1.25%. At the preceding FOMC meeting, the US raised rates by 0.25%, bringing the expected level of US interest rates to a range of 3.75% to 4.00%. As dollar gains coincide with alternating moves in the yen toward depreciation and appreciation, the direction of the yen is likely to depend on future additional rate hikes in Japan and the US.
The focus going forward is how far Governor Ueda (植田) will signal further rate hikes. Even if Japan and the US raise rates simultaneously, the interest-rate differential will not narrow, and yen appreciation could prove temporary once the market has fully priced in the available factors. Conversely, if the BOJ strongly signals additional rate hikes in October or December, yen appreciation could resume and the dollar-yen exchange rate could decline.
There is a view that an unwinding of yen carry trades will spread to global markets, and continued yen appreciation could affect risk assets such as US equities and bitcoin. Depending on movements in the yen in both directions, there may be periods when yen-denominated BTC remains firm even if dollar-denominated BTC declines. Conversely, if the yen continues to appreciate, yen-denominated BTC could face a significant downside risk.
After today’s BOJ meeting, attention will be paid to the dollar-yen exchange rate, US Treasury yields, fund flows into bitcoin ETFs, spot trading volume, and futures open interest. How the market prices in simultaneous rate hikes in Japan and the US will be a key factor determining future movements in the yen and bitcoin.