Bitcoin rises above $87,000 while the yen weakens after Japan raises interest rates.

Bank of Japan Raises Rates, Bitcoin Gains as Yen Slides

The Bank of Japan (BOJ) raised its short-term policy rate by 25 basis points to 0.75%, the highest level in nearly 30 years, continuing a gradual shift away from decades of ultra-loose monetary policy.

Bitcoin (BTC $88,471.90) strengthened as the yen weakened, dropping to 156.03 per U.S. dollar from 155.67. Bitcoin surged from $86,000 to $87,500 before pulling back slightly to around $87,000, according to CoinDesk data.

In its statement, the BOJ highlighted that inflation has stayed above its 2% target for an extended period due to rising import costs and firmer domestic price pressures. Yet, officials stressed that inflation-adjusted interest rates remain negative, signaling that monetary conditions are still accommodative despite the hike.

The market reaction was largely in line with expectations. Speculators had maintained long yen positions, limiting any sharp appreciation, and concerns that higher rates might trigger widespread unwinding of carry trades proved overstated.

For decades, Japan’s near-zero rates made the yen a preferred funding currency for carry trades, allowing investors to borrow cheaply to invest in higher-yielding assets such as U.S. tech stocks, Treasuries, and emerging-market bonds. Even after the rate increase, Japanese rates remain well below U.S. levels, reducing the risk of a mass unwinding and easing pressure on risk assets.