Bitcoin Tops $77K After Bank of Japan Raises Rates to 1.25%

Bitcoin climbed above $77,000 after the Bank of Japan raised its benchmark interest rate by 25 basis points, marking Japan's highest policy rate in 31 years.

The BOJ lifted rates from 1% to 1.25% in a 7-2 vote. The central bank said it was responding to risks that inflation could move above its 2% target.

Bitcoin rose to around $77,400, extending its recovery from an overnight low near $76,200. The yen weakened after the decision, with USD/JPY rising to around 156.70.

Why Bitcoin Rose Despite the BOJ Hike

The BOJ decision had been widely anticipated, meaning traders had already positioned themselves for the 25-basis-point increase.

The reaction also came after the Federal Reserve raised U.S. rates by 25 basis points earlier this week. With both moves largely expected, markets appeared more focused on the broader economic outlook than the rate increases themselves.

The gap between U.S. and Japanese interest rates also remains significant. That means the latest BOJ hike does not immediately eliminate the incentive for investors to borrow yen and invest in higher-yielding assets elsewhere.

Yen and Carry Trade Remain Important

The yen has been closely watched because years of low Japanese rates helped support the so-called yen carry trade, where investors borrow yen to fund investments in higher-yielding markets.

A sharp unwinding of those positions can pressure global risk assets, including cryptocurrencies. However, Japan's 1.25% rate remains well below the Federal Reserve's 3.75%-4.00% target range.

That leaves a substantial yield gap even after Friday's BOJ move.

Related: Fed and Bank of Japan Rate Hikes Could Come Within 48 Hours examined this exact risk and why the yen and carry trades matter for Bitcoin and global markets.

Bitcoin Faces a New Macro Test

The latest move comes after a volatile week for crypto.

Bitcoin had fallen sharply following the Senate's failure to advance the CLARITY Act and then faced additional pressure from the Fed's rate hike. ETF flows have also swung sharply, with U.S. spot Bitcoin ETFs recording a $450.4 million outflow earlier in the week before returning to positive flows.

The BOJ decision adds another important variable for markets heading into the final part of September.

For now, Bitcoin's move above $77,000 shows that tighter Japanese policy has not triggered the broad risk-off reaction some investors feared. The next focus will be whether the yen strengthens and whether the BOJ signals another rate increase.