The Bank of Japan raised its interest rate to 1%: a historic move and a signal for the crypto market
The Bank of Japan (BOJ) has made a historic decision: the key interest rate has been raised to 1% — the highest level since 1995. The decision was made on June 16 by a majority vote (7 to 1) and represents a 25 basis point increase from the previous 0.75%. Thus, Japan has returned to the 1% mark for the first time in 31 years, taking another decisive step away from the era of ultra-cheap money.
Reasons for the decision: inflation and a weak yen
The main catalyst for this move was inflation. Price growth accelerated amid rising oil prices, which in turn were triggered by geopolitical tensions around Iran. The BOJ warned that core inflation could settle above the 2% target level, necessitating preemptive measures.
An equally important factor was the weakness of the yen. By June, the JPY exchange rate had fallen to around 160 per dollar, leading to more expensive imports and rising daily expenses for Japanese households. In May, authorities had already spent nearly ¥11.7 trillion (about $73.5 billion) on currency interventions, but this did not have a long-term effect — the yen weakened again. It became clear that interventions alone were insufficient.
Only one board member, Toichiro Asada, voted against the increase. He believes the risks to production and employment are currently higher than the threat of price acceleration and proposed keeping the rate at 0.75%. The meeting itself took place without BOJ Governor Kazuo Ueda, who was hospitalized last week.
Plan to reduce government bond purchases
Alongside the rate hike, the BOJ continues to scale back its government bond (JGB) purchase program. Until January-March 2027, the monthly purchase volume will be reduced by approximately ¥200 billion per quarter. From April 2027, the reduction will stop, and monthly purchases will be fixed at around ¥2 trillion. By March 2030, the BOJ's government bond portfolio will shrink by about 36–39% relative to the level of June 2024, when the unwinding program first began.
At the same time, the regulator maintains flexibility: if long-term rates start to rise too quickly, the BOJ is ready to intervene promptly and increase bond purchases. The market reacted cautiously: the Nikkei 225 index rose by about 0.46%, and the yen strengthened slightly to 160.22 per dollar.
Impact on the crypto market
The rate hike hits the carry trade — a strategy where investors borrow cheap yen and invest it in risk assets, including cryptocurrency. Each of the BOJ's previous rate increases since 2024 resulted in a 20–32% drop in Bitcoin, and this move also sent the leading cryptocurrency lower — to around $65,800. However, this time the sell-off was contained by the weak yen and the US-Iran deal on the Strait of Hormuz, so the market reaction was limited to a decline of just over 1%.
My analysis: The BOJ's decision is not just a technical step but a signal of a changing era. Japan, long a symbol of cheap money, is beginning to tighten, and this will inevitably impact global liquidity flows. For the crypto market, this means increased volatility: each new BOJ move will trigger sell-offs in risk assets, especially at times when the yen strengthens. Investors should closely monitor the actions of the Japanese regulator — they could become a trigger for deeper corrections.