The Bank of Japan (BOJ) increased its benchmark interest rate by 25 basis points on Friday, bringing it to 1.25%, which is the highest mark seen in 31 years, while working to combat persistent inflation and a chronically weak yen.
The BOJ explained that this action was taken due to threats that inflation might exceed its 2% objective, fueled by escalating import expenses and energy costs.
This adjustment represents the central bank’s second rate increase in a span of three months and follows closely after U.S. Treasury Secretary Scott Bessent openly urged Tokyo to tighten monetary policy more rapidly to bolster the currency. He contended that a stable yen market contributes to Treasury market reliability and defended coordinated efforts to purchase yen as aligning with American priorities.
On the Tokyo-based bitFlyer platform, the bitcoin-Japanese yen exchange rate (BTC/JPY) grew by an additional 0.5% to reach JPY 12.06 million after the BOJ announcement. Meanwhile, CoinDesk data indicates that the dollar-based price of BTC climbed to $77,400, building upon its recovery from an overnight low of $76,200.
At the same time, the Japanese yen weakened against the U.S. dollar, pushing the USD/JPY rate from 156.20 up to 156.70.
Decisions made by the BOJ concerning interest rates and currency shifts are believed to impact global financial markets, largely because a lengthy era of nearly zero interest rates in Japan over the past ten-plus years encouraged traders to borrow yen in order to finance higher-yielding assets elsewhere.
Analysts have historically worried that an unwinding of this carry trade could drag down every market. A minor downturn observed in equities and Bitcoin during early August 2024 was thought to provide a preview of that hazard.
Nevertheless, those apprehensions appear exaggerated since Japanese interest rates remain well below U.S. levels even after this latest 25-basis-point increase, sustaining a substantial yield differential that keeps yen-backed carry trades appealing.
Earlier in the week, the Federal Reserve raised its benchmark interest rate by 25 basis points to a target band of 3.75%-4.00%, marking its initial hike since 2023. Financial institutions such as Morgan Stanley and Goldman Sachs currently anticipate that the Fed will implement another rate increase in October.
Originally published at https://www.coindesk.com/markets/2026/09/17/boj-rate-hike.
