Former BoJ Exec Rules out Another Rate Hike This Year, Bitcoin Dips Below $59K

Former Bank of Japan (BoJ) executive Makoto Sakurai has indicated that another interest rate hike is unlikely this year, following Japan’s recent increase which caused Bitcoin to crash.

On Monday, Bitcoin dipped below the $59,000 mark trading at $58,388 during press time.

“They won’t be able to hike again, at least for the rest of the year,” a former Bank of Japan board member Makoto Sakurai said in an interview. “It’s a toss-up whether they can do one hike by next March,” reports The Japan Times.

On August 7, BoJ Deputy Governor Shinichi Uchida also confirmed that Japan will continue with its low rates due to the weak yen and global financial instability.

The decision to raise rates was initially intended to curb inflation and stabilize the Japanese economy. However, Sakurai’s remarks suggest a more cautious approach moving forward, considering the potential impact on both domestic and global markets.

According to analysts at Greeks.live the recent dovish comments from the BoJ have also given the crypto market confidence, and despite the constant stream of negative market news, sentiment is more optimistic this week.

Bitcoin Investing Essentials, A Sneak Peek at This Week's Big Events (8/12-8/18)

After a week of adjustment, the market has come out of the blow of the Bank of Japan's interest rate hike. Recent dovish comments from the Bank of Japan have also given the market confidence, and…

— Greeks.live (@GreeksLive) August 12, 2024

Market Turmoil Triggered by Rate Hike

Japan’s central bank communication is coming under scrutiny amid the market turmoil that followed its July 31 decision to increase the policy rate to 0.25% from a range of 0 to 0.1%

The recent rate hike by the BoJ impacted the global economy in several ways. Domestically, it signalled a shift in monetary policy that could slow down economic growth, as higher interest rates typically lead to increased borrowing costs for businesses and consumers. This move also shows Japan’s efforts to address inflationary pressures and stabilize the yen.

Globally, Japan’s rate hike contributed to volatility in financial markets. Investors often react to change like this by adjusting their portfolios, which can lead to fluctuations in currency and asset prices. As one of the world’s largest economies, Japan’s monetary policy decisions influence global capital flows and investor sentiment.

​​Japan’s Low Interest Rates Boost Bitcoin Appeal

If the Bank of Japan decides to keep interest rates very low to help support its struggling economy. This low-rate environment makes Bitcoin and other higher-return investments more attractive to investors. For instance, when interest rates are low, investors can borrow money cheaply and invest in assets that offer higher returns, like Bitcoin. This strategy is called the “carry trade,” reports Arslan Butt for CryptoNews.

Further tightening by other major central banks, such as the U.S. the Federal Reserve, has put pressure on crypto and other speculative investments. Bitcoin’s decline is also part of a broader trend in the crypto market, which has been facing regulatory challenges and heightened volatility.

U.S. Rate Hike September?

The next Federal Reserve meeting will be held in September. Analysts expect the Fed to hold rates steady at a target of between 5.25%-5.50%.

Federal Reserve Chair Jerome Powell said officials could cut interest rates at their meeting in September, moving closer to a new phase that seeks to avoid weakness in the labour market amid signs inflation is heading lower, reports the Wall Street Journal.

“The probability of a rate cut in September continues to rise, also gave the market some confidence,” notes Greeks.live.