In a move that could provide relief for the cryptocurrency market, the Bank of Japan (BOJ) signaled on Wednesday that further interest rate increases in 2024 are unlikely. This announcement has buoyed Bitcoin and other digital assets, which had recently experienced significant declines.
The BOJ’s announcement came as a reassuring signal amid recent market volatility. Deputy Governor Shinichi Uchida stated that Japan’s economic conditions do not necessitate an immediate interest rate hike, suggesting that the Japanese economy is not in a position where it risks falling behind if rates are held steady.
“Japan’s economy is not in a situation where the bank may fall behind the curve if it does not raise the policy interest rate at a certain pace,” Uchida remarked in a speech, indicating that the BOJ does not foresee the need for further rate increases in the near term.
This stance from the BOJ is seen as a positive development for Bitcoin, which had faced a severe downturn in recent weeks. Bitcoin’s price had plummeted 24% from August 2 to Monday, according to CoinGecko data. Ether also suffered, losing 31% during the same period. However, Bitcoin has since rebounded by 15%, trading at $57,180 in mid-morning UK time, with the broader crypto market following suit.
The recent market turbulence was partly triggered by a weak US jobs report, which fueled concerns that the Federal Reserve may have missed an opportunity to lower rates. Additionally, the BOJ’s previous rate hike of 0.25% aimed at combating inflation had led to a stronger yen, putting pressure on Japanese investors holding leveraged positions in various securities, including US stocks.
In response to the BOJ’s latest move, the Japanese stock market has seen a recovery. After a 12% decline on Monday, it rebounded 10% on Tuesday and closed up another 2.3% on Wednesday.
Uchida expressed optimism about the US economy, suggesting it is likely to achieve a soft landing. He attributed recent fluctuations in Japanese stock prices to changes in corporate profitability rather than significant shifts in economic fundamentals.
The Deputy Governor reaffirmed the BOJ’s commitment to maintaining monetary easing with the current policy interest rate and emphasized the bank’s readiness to monitor market developments closely.
“Let me reiterate my view that the Bank needs to maintain monetary easing with the current policy interest rate for the time being,” Uchida concluded, offering reassurance to investors and markets alike.
