The Bank of Japan's decision to maintain its benchmark interest rate at 0.75% was met with a split vote, as three board members pushed for an immediate rate increase. This development has heightened expectations of a potential rate hike by the end of the second quarter, with the yen experiencing a significant surge and bitcoin facing downward pressure.
The central bank also revised its forecast for core inflation, predicting a 2.8% increase for the current fiscal year, while lowering its economic growth projections to 0.5%. The likelihood of a June rate hike has been priced in by traders, with a 74% chance of occurrence. The strengthening yen has raised concerns about a potential carry trade unwind, which could lead to risk aversion and negatively impact global risk assets, including bitcoin.
However, recent data suggests that yen-funded carry trades remain active, with Japan continuing to increase its holdings of U.S. Treasury notes.