The Bank of Japan's recent monetary policy decision has heightened anticipation of a possible rate hike by the end of the second quarter, with the yen experiencing a surge while bitcoin faces downward pressure. The central bank maintained its benchmark interest rate at 0.75%, but the 6-3 vote split in favor of keeping rates unchanged signals a growing inclination among policymakers to increase borrowing costs. This shift is largely attributed to the impact of global energy price increases on inflation, particularly in energy-import-dependent economies like Japan. As a result, markets are now pricing in a 74% chance of a rate hike in June, aligning with the consensus among Bank of Japan observers.
The yen's rise, which has pushed the dollar-yen pair down, may trigger another carry unwind shock, potentially leading to risk aversion and affecting global risk assets, including bitcoin. However, recent data on market flows suggests that yen-funded carry trades remain active, with Japan continuing to increase its holdings of U.S. Treasury notes, which could mitigate the impact of a potential rate hike on global risk aversion.