Will the possible interest rate hike by the Central Bank of Japan next week affect the bullish sentiment of BTC and other Trump trades?

According to the latest survey by Bloomberg, nearly three-quarters of Japanese Central Bank observers expect the BOJ to raise interest rates next week. The USD/JPY exchange rate once fell below 155, hitting a one-month low. Will this once again trigger a chain reaction of yen arbitrage close positions and affect the optimistic sentiment of BTC and other Trump trades?

The central bank may raise interest rates on 1/24

Bloomberg quoted sources as saying that the Bank of Japan (BOJ) may raise interest rates from 0.25% after the two-day meeting ending on January 24th, unless Trump disrupts the market at the beginning of his presidency or changes expectations for the global economy.

Earlier this week, Kazuo Ueda, the Governor of the Central Bank of Japan, and his deputy Ryozo Himino, indicated that they will decide at the January meeting whether an interest rate hike is necessary. Subsequently, the views of officials largely supported the market's expectations of a rate hike this month.

Since the December meeting, officials have become more confident in wage increases, especially after the recent Japan Central Bank branch manager meeting. Data shows that the cost of living in Japan has been high, and the economy is gradually recovering. Insiders say that the annual spring wage negotiations may produce similar results to last year, and more and more Japanese companies see wage increases as a given fact.

According to Bloomberg's latest survey, nearly three-quarters of Japanese Central Bank observers expect the BOJ to raise interest rates next week.

The yen rose due to the possibility of interest rate hikes as the yen depreciated.

The weakness of the yen is also seen as a key factor. About 69% of economists said that the previous depreciation of the yen increased the possibility of a rate hike at this meeting. Last week, the USD/JPY exchange rate reached a six-month high, approaching the key level of 160. However, due to increased expectations for interest rate adjustments by the Central Bank of Japan, the yen strengthened and the USD/JPY exchange rate briefly fell below 155, hitting a one-month low. It is currently trading around 155.25.

Stay vigilant about Trump's policies

Rodrigo Catril, Currency Strategist at National Australia Bank in Sydney, said that the market is preparing for the Bank of Japan's rate hike next week, and officials have become more confident. Of course, Trump's tariffs may disrupt the plan, but Japan is not a major focus of Trump's concern.

Ueda said that in addition to the outlook for the US economy, wage growth momentum is one of the two key points that need to be closely watched when deciding on the timing of raising borrowing costs. Sources said that although officials from the Central Bank of Japan hope for a smooth transition to the second Trump administration, they need to remain vigilant to any risks.

ArbitrageClose Position again? Can BTC and other trades be shaken by Trump?

Due to the long-term low interest rate policy, Japan has been used by investors as a tool for carry trade, which is also one of the main reasons for the long-term depreciation of the Japanese yen. The yen started to depreciate in 2021, and the USD/JPY exchange rate broke through the 160 level several times in July last year. Japan intervened in the foreign exchange market to prevent the further depreciation of the yen.

Note: Carry trade refers to borrowing money in low-interest-rate countries (such as Japan) and exchanging it for the currency of higher-interest-rate countries (such as the United States) to earn interest rate differentials.

The Bank of Japan caused a global capital panic and massive sell-off when it raised interest rates at the end of July last year. At that time, Bitcoin fell from 66K to 55K within a week.

If the Central Bank of Japan raises interest rates again, will it cause another chain reaction of Yen Arbitrage Close Position? However, some analysts believe that although the slowdown in Yen Arbitrage trading may ease the optimistic sentiment of 'Trump trading,' the impact may be gradual rather than immediate. The key is to observe how they balance domestic inflation targets and global market stability.

Will the optimistic sentiment of BTC and other Trump transactions be affected by the possible interest rate hike by the Japanese Central Bank next week? Originally appeared on Chain News ABMedia.