Bank of Japan raises interest rates by 25 basis points. Bitcoin tops $77,000

The Bank of Japan lifted its benchmark interest rate by 25 basis points on Friday, moving the policy rate to 1.25% — its highest level in three decades. The central bank said the increase was motivated by risks that inflation could push above its 2% target, driven in part by higher import and energy costs. This marks Tokyo’s second rate increase in three months. Financial markets reacted quickly to the decision. The Japanese yen weakened against the U.S. dollar, with USD/JPY rising to about 156.70 from 156.20. Bitcoin also advanced: data from CoinDesk showed BTC’s dollar-denominated price climbed to roughly $77,400, recovering from an overnight low near $76,200. On Tokyo’s bitFlyer exchange, the BTC/JPY pair rose about 0.5% to JPY 12.06 million. Analysts note that BOJ policy shifts can have outsized effects because of a long history of very low rates in Japan, which encouraged traders to borrow in yen to finance higher-yielding positions overseas. Market participants have previously warned that a reversal of those so-called carry trades could unsettle global markets, although some observers say the yield gap with the U.S. remains wide enough that yen-funded carry trades are still attractive even after the latest hike. The BOJ’s move follows a period of tightening among other major central banks: earlier in the week, the U.S. Federal Reserve raised its benchmark rate by 25 basis points to a target range of 3.75%-4.00%, its first hike since 2023. The BOJ decision also came weeks after public appeals from U.S. Treasury officials for faster Japanese tightening to help stabilize yen markets and support orderly conditions in global markets.