The Bank of Japan raised its benchmark interest rate to 1%, the highest level since 1995, sparking a sell-off in Bitcoin. The move weighed on risk assets, with Bitcoin extending its losses as investors worry that tighter Japanese monetary conditions could trigger another round of yen carry trade unwinding.
The world's largest cryptocurrency fell more than 2% over the last 24 hours, trading near $65,800 after briefly touching an intraday low of $65,400. The rate hike was widely anticipated, but its impact on Bitcoin has left traders cautious given the historical correlation between Japanese rate hikes and sharp corrections across crypto markets.
The BoJ's decision reflects growing confidence that inflationary pressures are becoming more entrenched in the Japanese economy. Rising energy costs and stronger price pass-through effects across businesses were cited as key reasons behind the decision.