According to external sources, as the yen continues to weaken, the Central Bank of Japan is likely to accelerate interest rate hikes this year, and the base rate may even rise to more than 2%. The focus of the article is not only on the policy direction of Japan, but also on whether this kind of tightening can be channelled through exchange rates and risk preferences to such assets as bitcoin.
Yen under pressure.
The report cites the judgement of a former JCBO official that the JCBC may be moving forward with interest rate hikes faster this year. Japan's current policy interest rate is 1 per cent, while the annual national debt-return rate has risen to 2.8 per cent above, at a high rate of at least decades.
Despite Japan ' s recent consecutive interest rate hikes and the upward trend in the rate of return on national debt, the yen has still not fallen against the United States dollar. Since the beginning of 2021, the accumulated depreciation of the yen against the United States dollar has been about 60 per cent, with the latest reported US$ 1 to JPY 162.36; the decline also reached about 3 per cent during the year.
The market's worried about arbitrage.
The article mentions that there is a long-standing perception in the market that if the yen continues to rebound, it could trigger a return of trade that is partly financed with low-cost yen, affecting developed market national debt, technology equity and encrypted assets.
By this logic, the Bank of Japan may increase the cost of financing and weaken the Japanese yen-based arbitrage, if the increase is significantly accelerated, thus putting pressure on risk assets. Bitcoin may also be drawn into such a chain of transactions.
Bitcoin and Japanese yen are weak recently.
However, the article also notes that recent market performances do not fully support the traditional narrative. Bitcoin and the yen have recently shown a strong positive correlation, both of which are synchronous and weak, showing a similar downward trend against the United States dollar.
This means that if the Central Bank of Japan accelerates the tightening and drives the Japanese yen steady, the result may not necessarily be against the TT$. At least in terms of recent correlations, the Yen movement is not simply linked to bitcoin.
Financial pressures are variables.
It was also mentioned that some economists were concerned that a rapid increase in interest rates by the Central Bank of Japan could further increase Japan ' s already fragile financial burden. The rise in interest rates will push up government financing costs, which will also limit the space for policy tightening.
Taken as a whole, the article argues that if the Central Bank of Japan accelerates the interest rate hike, it may in the short term influence the yen and global risk preferences and then transmit them to bitcoin. The end result will depend on whether the yen really stopped falling and how the market re-pricing the cost of financing and the valuation of risk assets.