Bitcoin Faces 2 December Rate Hikes as Japan’s Inflation Clears the BOJ’s Target

Japan’s core inflation rose above the Bank of Japan’s (BOJ) 2% target in September for the first time in nine months. That strengthens the case for a rate hike in December, when the Federal Reserve (Fed) is also expected to move.

The BOJ is expected to hold next week. Its guidance on further hikes, though, could set the tone for an already sliding Bitcoin (BTC).

Price Pressure Spreads Past the Fuel Pump

Core CPI, which excludes fresh food, rose to 2.1% from 1.7% in August, according to Reuters. An index that also strips out fuel rose to 2.4% from 1.9%. 

Goods prices rose 2.8%, up from 2.6% in August, even as rice prices fell 20.6%, CNBC reported. Services inflation picked up to 1.5% from 1.2%.

The BOJ will weigh these figures when it updates its forecasts at the next two-day policy meeting ending on October 30.

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December Puts 2 Rate Decisions in Bitcoin’s Path

The BOJ raised its policy rate to 1.25% in September, a 31-year high. Many analysts in a Reuters poll expect a hike to 1.50% in December and a peak around 1.75% or 2%. 

Marcel Thieliant, head of Asia-Pacific at Capital Economics, expects the BOJ to hold but stay wary of upside inflation risks.

“With little evidence that the tightening delivered so far has slowed the economy, the risks are shifting towards a higher peak in the policy rate than our forecast of 2%,” he said.

In the US, CME FedWatch data puts an 80.5% chance on a higher Fed target range by December 9.

Odds of a Fed move on October 28 stand at 7.2%, down from 55.4% a month earlier. The BOJ follows on December 17 and 18.

Bitcoin Meets Its Yen Test on Shaky Ground

The two central banks’ decisions could also affect Bitcoin through the yen carry trade. Investors borrowing yen to finance riskier investments may unwind those positions as Japanese rates rise, which could pressure crypto markets.

A Fed rate hike could partly offset that pressure by supporting the dollar. If both central banks raise rates by similar amounts, the US-Japan interest-rate differential would remain broadly unchanged. That could limit the incentive to unwind carry trades.

Bitcoin slid from about $70,000 to $49,000 after the BOJ lifted rates to 0.25% in July 2024. Ahead of September’s hike, however, it held steady while Japanese assets sold off, BeInCrypto reported.

It now heads into December on weaker footing. Bitcoin traded at $81,293 at press time, down 3.16% over the past 24 hours, per BeInCrypto Markets.

The coin has lost 5.6% over the past month. It peaked above $86,000 in early October, and rebounds since October 9 have stalled below $84,000. 

That leaves less cushion if the BOJ’s October 30 guidance leans hawkish.

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