The Bank of Japan (BOJ) has announced the formal end of its negative interest rate policy and the first interest rate hike in 17 years. The benchmark interest rate has been raised from -0.1% to a range of 0% to 0.1%. The central bank has also cancelled its yield curve control policy. Following the announcement, Japanese stocks have risen while the yen continues to depreciate. Can Bitcoin against the yen continue to reach new highs?
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Japanese stocks rise, yen continues to depreciate
Can Bitcoin against the yen reach new highs?
The Nikkei 225 index is currently quoted at 39,900, up 0.4%. After decades of stagnation, the Japanese stock market finally broke through its 1989 high in February and reached a high of 40,472 in the midday session on March 6.
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However, despite the end of the negative interest rate policy implemented since February 2016, there is still a difference of more than 5% in interest rates compared to the US dollar. The US dollar against the yen (USDJPY) briefly declined after the announcement but then continued to rise, reaching 150.36 at the time of writing. The yen’s trend remains weak.
Due to the yen’s long-standing negative interest rates, it has been used by investors as a tool for carry trade, and Bitcoin against the yen reached a historical high back in February (when Bitcoin against the US dollar was still at 52K). Now that Japan has finally ended the era of negative interest rates, with the Japanese stock market continuously rising and Japanese wages and domestic prices increasing synchronously, can the yen escape its depreciation fate and slowly return to normal?
Note: Carry trade refers to borrowing money in a low-interest-rate country (such as Japan) and exchanging it for the currency of a higher-interest-rate country (such as the US) to earn interest differentials.
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BOJ
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Carry trade
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