Crypto markets eased on Friday as a combination of rising Japanese inflation, ongoing disruptions from the Iran conflict, and growing expectations of a more hawkish Bank of Japan dampened risk appetite.
Bitcoin BTC $77,565.55 traded near $77,800, struggling to recover momentum after failing to break above Thursday’s high of $78,700 during early Asian trading, according to CoinDesk data. The broader rally that started in late March from around $65,000 has begun to stall, with price action turning more range-bound since midweek.
Ether (ETH) also weakened, trading close to $2,300 and slipping about 0.8% since midnight UTC. The move slightly underperformed bitcoin’s 0.6% decline, reflecting a cautious tone across major cryptocurrencies.
Sentiment was weighed down by fresh inflation figures from Japan. The Corporate Service Price Index (CSPI) rose 3.1% year-on-year in March, just above forecasts of 3.0%, signaling continued price pressure in the services sector.
At the same time, Japan’s core inflation rose to 1.8% from 1.6%, marking its first monthly increase in five months. Headline inflation also edged up to 1.5% from 1.3%, though it remained below the Bank of Japan’s 2% target for a second consecutive month. A softer reading in core-core inflation, which excludes food and energy, showed a slowdown to 2.4%, its lowest level since October 2024.
Inflation pressures are also being influenced by higher energy costs tied to geopolitical tensions, particularly disruptions in oil flows through the Strait of Hormuz amid the ongoing Iran conflict. Japan, a major oil importer, remains highly exposed to such shocks. Brent and WTI crude prices have surged sharply, with WTI up more than 40% to around $96 since the conflict escalated in late February.
Markets are now focused on the Bank of Japan’s upcoming policy decision. Analysts expect the central bank to hold rates steady but signal a more hawkish outlook, with potential tightening moves coming into view as early as June if inflation risks persist.
A more aggressive tone from the BOJ could strengthen the Japanese yen (JPY), which is currently positioned bearishly in futures markets. That leaves room for a sharp upside reaction if policy guidance surprises to the hawkish side.
However, a stronger yen could also trigger broader market turbulence. The currency has long been used to fund global carry trades, and a rapid appreciation may force unwinding of leveraged positions, increasing volatility across risk assets.
Geopolitical risks remain another key driver. Reports suggest Iran has deployed additional naval mines in the Strait of Hormuz, a critical passage handling around 20% of global seaborne oil shipments. Shipping traffic through the strait has already dropped significantly since the conflict intensified, according to Axios.
The Pentagon has warned lawmakers that clearing mines in the Strait could take up to six months, with operations only possible after the conflict ends. It also cautioned that sustained energy price pressures could keep U.S. inflation elevated, potentially delaying Federal Reserve rate cuts this year.
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