Is the era of negative interest rates ending in Japan? What impact will it have on Bitcoin if Japan begins its first interest rate hike?
(Brief summary:
Binance Japan plans to launch a stablecoin in Japanese yen, collaborating with Mitsubishi UFJ Trust and Banking Corporation. This will meet regulatory requirements.)
(Background:
While global regulations on cryptocurrencies are tightening, why is Japan embracing Web3 and stablecoins more tightly?)
Japan is about to enter its annual spring labor-management negotiations, known as “shunto” in Japanese. 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.
According to informed sources familiar with the thinking of the Bank of Japan (BOJ), the trend of wage growth is driving an increasing number of BOJ policymakers to support 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 the sources, the BOJ is expected to make significant decisions at the monetary policy meeting on March 18-19. If a majority of the nine members of the Board of Directors vote in favor, Japan may end its continuous period of negative interest rates since 2007 and embark on its first interest rate hike.
Furthermore, the sources revealed that after the end of 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 yields and the purchase of assets with higher risk attributes.
In an interview with Kelvin Tay, Chief Investment Officer of UBS Global Wealth Management, and Bloomberg, the possibility of the BOJ reversing its negative interest rate policy was discussed. If the wage increase during the spring negotiations exceeds 4%, the likelihood of the BOJ reversing its negative interest rate policy would be quite high, and the appreciation of the yen could have a negative impact on Japan’s stock market performance.
Will the appreciation of the yen contribute to the rise of Bitcoin?
Among the major fiat currencies (USD, EUR, JPY), the yen has been the weakest performer in the past, resulting in the yen trading at a premium against Bitcoin. As one of the world’s top four economies, the uncertainty of the policy risks of the BOJ 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 traders. If the BOJ withdraws its liquidity support policy, it could lead to the appreciation of the yen. This change would significantly reduce the effectiveness of yen carry trades and subsequently affect the risk appetite in financial markets. As the world’s fourth-largest economy, Japan may see a large influx of capital into higher-risk assets such as technology stocks or cryptocurrencies.
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