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A former Bank of Japan policymaker has cautioned that interest rates could climb तेजी as the yen continues to weaken against the U.S. dollar.
Tsutomu Watanabe, now an economics professor at the University of Tokyo and a former BOJ official, said the central bank may speed up rate hikes this year, potentially lifting the benchmark rate beyond 2%, according to Bloomberg.
Japan’s policy rate currently stands at 1% after recent tightening steps, while the 10-year government bond yield has risen above 2.8%—its highest level in over three decades, based on TradingView data.
Even so, the yen has remained under pressure. Since early 2021, it has dropped roughly 60% to around 162.36 per dollar, a steep decline for a major global currency. It has also weakened by about 3% year-to-date.
A faster pace of rate increases could help put a floor under the yen or even drive a rebound. However, the impact on bitcoin (BTC) remains uncertain.
A long-standing market view suggests that a stronger yen could force investors to unwind leveraged positions across global bonds, equities, and cryptocurrencies that were financed through cheap yen borrowing. Such a move could weigh on risk assets, including crypto.
However, this theory has recently been challenged by a positive correlation between the yen and bitcoin, with both assets declining together against the dollar.
At the same time, some economists caution that aggressive tightening could worsen Japan’s already fragile fiscal outlook.
In short, the situation remains complex with multiple competing forces at play.
