Is the era of negative interest rates in Japan coming to an end? What impact would it have on Bitcoin if Japan embarks on its first interest rate hike?
(Background:
Binance Japan to launch stablecoin in Japanese yen: Collaborating with Mitsubishi UFJ Trust and Banking Corporation’s Progmat Coin to meet regulatory requirements.
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(Additional background:
Why is Japan embracing Web3 and stablecoins while global cryptocurrency regulations are tightening?
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Japan is about to enter its annual spring labor negotiations (known as “shunto”), and according to foreign media citing sources, the expected wage increase for 2023 is projected to exceed 5%, marking the largest increase in the past 30 years.
In line with this trend of wage growth, informed sources familiar with the thinking of the Bank of Japan (BOJ) have revealed that an increasing number of BOJ policymakers are supporting the end of the long-standing policy of negative interest rates.
The era of negative interest rates is expected to come to an end
According to sources, the BOJ is expected to make significant decisions during its monetary policy meeting on March 18-19. If the majority of the nine board members vote in favor, Japan may end the era of negative interest rates that has been in place since 2007 and embark on its first interest rate hike.
Furthermore, the sources also revealed that after ending negative interest rates, the BOJ may undergo a comprehensive reform of its large-scale economic stimulus program. This reform may include adjustments to the strategy of controlling bond yield curves and the purchase of assets with higher risk attributes.
In an interview with Kelvin Tay, Chief Investment Officer at UBS Global Wealth Management, and Bloomberg, the possibility of the BOJ reversing its negative interest rate policy was discussed. Tay believes that if the wage increase during the spring negotiations exceeds 4%, the likelihood of the BOJ reversing its negative interest rate policy will be quite high, and the appreciation of the Japanese yen may have a negative impact on the performance of the Japanese stock market.
Will the appreciation of the Japanese yen contribute to the rise of Bitcoin?
Among the major fiat currencies (USD, EUR, JPY), the Japanese yen has historically been the weakest, resulting in the yen trading against Bitcoin at a premium. As Japan is one of the world’s top four economies, the uncertainty of the country’s central bank policy risks has attracted significant attention from investors in both traditional and cryptocurrency markets.
The BOJ’s long-standing policy of maintaining low interest rates and high liquidity has attracted many yen carry trade arbitrage traders. If the BOJ withdraws its liquidity support policy, it may lead to the appreciation of the yen, significantly reducing the effectiveness of yen carry trades and affecting the risk appetite of financial markets. As the world’s fourth-largest economy, Japan may see a large amount of capital flow into higher-risk assets such as technology stocks or cryptocurrencies in the future.
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