Japan raises interest rates by 1 basis point! The yen depreciates instead of appreciating, and Bitcoin breaks through 87,000 dollars.

The Bank of Japan today (19th) raised interest rates by 1 basis point as expected, but the financial market staged a “counterintuitive” drama: the yen fell instead of rising, depreciating to the 156 level against the US dollar; Bitcoin briefly surged past 87,000 US dollars.

To curb the risk of continuously rising prices, the Bank of Japan (BOJ) has decided to raise the policy interest rate by 25 basis points (1 yard) to 0.75%, marking the highest interest rate level in 30 years and signifying Japan's formal farewell to the era of ultra-loose monetary policy that lasted for decades.

In the decision statement, the Bank of Japan admitted that due to rising import prices and soaring domestic prices, the inflation rate has long been above the target of 2%. However, decision-makers also emphasized that the “real interest rate” after excluding inflation is still negative. This means that even if the nominal interest rate is raised, the monetary policy environment remains biased towards “easing.”

After the announcement, the market showed a typical “sell the fact” trend. The exchange rate of the Japanese yen did not strengthen due to the interest rate hike, but instead slid from 155.67 yen per dollar to 156.03 yen.

At the same time, Bitcoin surged dramatically, rising from a low of 86,000 USD to 87,500 USD, with the increase narrowing before the deadline, oscillating around 87,000 USD.

The reason the market reaction is so calm can be attributed to two main factors: on one hand, the Bank of Japan's interest rate hike has already been fully digested by the market; on the other hand, speculative funds have accumulated a large number of “long positions in yen” over the past few weeks, which has instead suppressed the momentum for price chasing after the positive news has run its course.

a false alarm

Previously, the market was concerned that Japan's interest rate hike could drive up the yen, potentially triggering a large-scale unwinding of “yen carry trades,” which would lead to significant declines in global stock markets and cryptocurrencies.

The so-called “Yen Arbitrage Trading” refers to investors borrowing yen at extremely low interest rates, even negative interest rates, to invest in assets with higher returns, including U.S. tech stocks, U.S. Treasuries, and even emerging markets and crypto assets. Over the years, this mechanism has effectively provided cheap leverage to global markets, amplifying liquidity and risk appetite.

However, with the announcement of Japan's interest rate decision, this panic has proven to be overblown. Analysts had previously pointed out that even if the Bank of Japan raises interest rates to 0.75%, the level of interest rates in Japan would still be far lower than that in the United States, and the structure of funding costs has not fundamentally changed, so there will naturally not be a large withdrawal of arbitrage funds.

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Disclaimer: This article is for providing market information only. All content and opinions are for reference only and do not constitute investment advice. They do not represent the views and positions of the blockchain community. Investors should make their own decisions and trades; the author and the blockchain community will not bear any responsibility for any direct or indirect losses incurred by investors' transactions.
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