Japan Rates Hit Three-Decade High, But No ‘Meaningful Disruption’ to Crypto Market

Crypto markets held steady on Tuesday even as Japan lifted interest rates to a three-decade high amid rising domestic inflation.

Japan's economy has “recovered moderately” despite weakening factors tied to the Middle East, with strong corporate profits and a firmer job market cushioning the strain on activity, the central bank stated.

The country’s broader economy is expected to align with the “baseline scenario” for moderate growth, “albeit at a decelerated rate," the guidance reads, pointing at government measures to soften energy costs that could ease the risk of a sharp slowdown.

Bank of Japan rate hikes have long pressured crypto by unwinding the yen carry trade, where investors borrow cheap yen to buy higher-yielding assets abroad and profit on the rate gap while the currency stays weak.

Still, Bitcoin and the broader crypto market held steady despite Tuesday's rate hike, even as traders appeared to have braced for a selloff.

“The Yen carry trade has failed to trigger any meaningful disruption in either crypto or global equities this time around,” Ryan Yoon, senior analyst at Tiger Research, told Decrypt.

The yen carry trade would remain to be "just another headline" unless Japan's shift drains liquidity from the U.S. market, Yoon said. Once the market processes a narrative and realizes “the sky isn't falling,” that scare “loses its power to move prices,” he added.

Japan's hike had less importance to the market now, given how “it's been priced in before,” Maksim Balashevich, founder and CEO of Santiment, told Decrypt.

“The ‘unknown’ events of the future, which aren't fully priced in and able to move markets significantly, must be some other pieces of unveiling reality,” he added.