The Bank of Japan held its benchmark interest rate steady at 0.75% on Friday, while upgrading economic growth and inflation forecasts in a decision that carries significant long-term implications for cryptocurrency markets.
As Japan navigates a collision between monetary tightening and fiscal expansion ahead of snap elections, crypto markets face growing exposure to yen-driven liquidity shifts and potential unwinding of carry trades.
The decision came in a split 8-1 vote, with board member Hajime Takata casting a lone dissent in favor of raising rates to 1.0%. Takata argued that mounting inflation pressures and improving global economic conditions support further tightening.
The BOJ raised its real GDP growth forecasts to 0.9% for fiscal 2025 and 1.0% for fiscal 2026, up from 0.7% in October projections. More notably, the central bank upgraded its core CPI forecast to 3.0% for 2025 and 2.2% for 2026, signaling persistent inflationary pressures ahead.
December headline inflation came in at 2.1%, marking the 45th consecutive month above the BOJ’s 2% target—the longest such streak in decades.
On the same day, Prime Minister Sanae Takaichi’s Cabinet approved the plan to dissolve Japan’s lower house of parliament, triggering a snap election scheduled for February 8. The move kicks off the shortest campaign period on record at just 16 days.
Takaichi has placed a two-year suspension of the 8% food sales tax at the center of her campaign, responding to voter concerns over soaring living costs. An NHK survey showed 45% of respondents ranked the high cost of living as their top priority.
Her proposed record $783 billion budget for the next fiscal year has fueled concerns over Japan’s fiscal trajectory. Bond yields have surged to multi-decade highs, while the yen has fallen 4.6% against the dollar since Takaichi took office in October, currently trading around 158.97.
finance.yahoo.com
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