Bitcoin weakened against the yen after the Bank of Japan revised its economic outlook and markets raised expectations for a policy move. On bitFlyer, BTC/JPY fell 0.6% to ¥12.28 million. In currency markets, USD/JPY dropped about 0.5% to 158.95 as the yen gained ground. TradingView data also showed bitcoin losing value against the US dollar.
BoJ lifts inflation view and cuts growth forecast
The Bank of Japan now expects Japan’s core inflation rate to reach 2.8% in the current fiscal year. Its growth outlook was revised lower at the same time, with the earlier 1% forecast cut to 0.5%. The bank pointed to renewed disruptions in global energy flows through the Strait of Hormuz and rising international energy prices, both of which add pressure to Japan’s import-reliant economy.
Those revisions quickly fed into rate expectations. Financial markets are now pricing in a 74% chance of a BoJ rate hike at the June 16 policy review, a figure that was reported to be close to recent Bloomberg News analysis.
Yen strength puts carry trades back in focus
As rate-hike odds increased, the yen firmed against the dollar. That matters because the yen has long been used as a funding currency in global markets: investors borrow cheaply in yen and deploy capital into higher-yielding assets overseas. If the yen starts to rise, those positions can come under pressure, and risk assets may face selling.
That concern has returned to crypto markets. Traders looking at the BoJ’s latest signals pointed to a similar policy shift last August, when bitcoin reportedly dropped from $65,000 to $50,000 within one week. The comparison has revived attention on how carry trade reversals can hit digital assets.
Japanese investors still hold overseas positions
Current capital flow data, though, does not show a broad unwind. Recent figures indicate these carry trade-related positions remain active. Data for February showed Japanese institutional investors continuing to buy US Treasury bonds, lifting Japan’s total holdings to $1.24 trillion, the highest level since February 2022.
Founders of the LondonCryptoClub newsletter said Japan remains the largest foreign holder of US Treasuries and has been a net buyer in 13 of the last 14 months. In their view, that pattern shows Japanese investors are still pursuing higher-yield opportunities, and claims of a large-scale carry trade unwind are not supported by the available data.
Markets are now watching for any sign that the BoJ could move away from its long-running ultra-low-rate stance. Currency and crypto prices have already reacted, but the figures cited so far suggest Japanese investors have not materially reduced their international exposure.