Rate hikes are typically bearish for risk assets like cryptocurrencies, especially by the Bank of Japan, whose long era of ultra-low rates had supported global bull markets in stocks and bonds.
The positive crypto reaction was likely due to a key bearish element in the announcement: the BOJ’s decision to pause its bond reduction.
As InvestingLive noted, “the pause in bond tapering from April 2027, which sets monthly JGB purchases at around 2 trillion yen, is the complicating factor: it removes a source of upward pressure on yields at the long end and could be read as a concession to the government’s concerns about borrowing costs, raising questions about the BOJ’s operational independence even as it adjusts policy rates.”
By stopping the tapering of bond purchases (or stabilizing the taper), the BOJ effectively seeks to limit upward pressure on government bond yields. This can help keep long-term borrowing costs under control, supporting financial markets and providing a counterweight to the tighter policy stance in the short term.
Overall, while the overall rate hike was expected, the moderate tilt in bond purchases likely helped calm markets and fueled bitcoin’s rebound.
