The Bank of Japan's recent monetary policy decision has heightened expectations of a potential borrowing cost increase by the end of the second quarter, with the yen reacting positively and bitcoin struggling. The central bank's decision to maintain its benchmark interest rate at 0.75% was not unanimous, as three board members advocated for an immediate rate hike. This 6-3 vote split marks the largest division since Kazuo Ueda took office as governor, indicating a growing push to raise borrowing costs among policymakers. The central bank also revised its core inflation forecast to 2.8% for the current fiscal year and lowered its economic growth projections to 0.5%.
Traders have priced in a 74% chance of a rate hike on June 16, aligning with the consensus among Bank of Japan watchers. The Japanese yen has risen, causing the dollar-yen pair to decline by nearly 0.5%, while the bitcoin-yen pair has fallen by 0.6%.
Trends in the Japanese yen are closely monitored due to its role as a funding currency, and sustained yen strength is often associated with risk aversion. However, recent data suggests that yen-funded carry trades remain active, with Japan increasing its holdings of U.S. Treasury notes, indicating that the unwinding of these trades may not be imminent.