The Bank of Japan plans to raise interest rates to 1.25%, hitting a 30-year high. Bitcoin is unscathed?

According to Woofun AI, the Bank of Japan will hold a monetary policy meeting on Thursday and Friday. The market generally expects the policy interest rate to rise to 1.25%. If this level is achieved, it will be the highest point in the country's interest rate since April 1995.

At the macro level, short-term treasury bond yields have surged far faster than the central bank actually raised interest rates. The yield on 6-month treasury bonds closed at around 1.335% on Friday, and the product was still negative two years ago; the 3-month yield once hit 1.25%, a 31-year high, and the 6-month yield also rose to 1.34%, a 31-year high.

According to data compiled by Woofun AI, 66 of the 68 economists surveyed by Reuters on Friday expect interest rate hikes this week. Nearly 90% expect interest rates to reach 1.50% by the end of March next year, and the tightening may continue in 2026. This increase was due more to fiscal pressure than inflation: Japan's 10-year treasury yield rose to 3% for the first time this month (highest since 1996), and the 2-year yield was close to 1.85%; in contrast, the July consumer price index rose 1.9% year on year, and the core price index rose 1.8%, falling below the 2% target for the seventh month in a row. On the supply side, provincial departments applied for a record budget of 143 trillion yen, and the Ministry of Finance raised interest rate assumptions on long-term treasury bonds to 3.8%.

The chain reaction in the market was remarkable, and Japanese yen arbitrage trading showed quantifiable signs of liquidation. After the joint intervention of Japan and the US in the foreign exchange market (15.4 trillion yen), the yen appreciated by about 6% from its July low. In the week ending September 8, speculators' net long positions in yen increased by 103,000 contracts; between February and June, Japan's holdings of US Treasury bonds decreased by $122.6 billion. The Nikkei 225 index fell 8.4% in a month, 13% below its all-time high in June.

However, the price of Bitcoin remained near $77,721, rising 0.8% in 24 hours, and had already absorbed a similar shock to the yen last week.

Looking back at August 2024, the Bank of Japan raised interest rates by only 0.25%, causing the Nikkei Index to plummet 12.4% in a single day, and Bitcoin fell from about $70,000 to $49,000. The rate hike this Friday will be five times that of that time. Analysts believe that the real possibility of breaking the current market divide is not the interest rate hike itself, but rather a hawkish signal from the central bank about the pace of further rate hikes in the future.