【Decision outcome】

On September 18, the Bank of Japan raised its policy rate by 25 basis points to 1.25%, the highest level in 31 years since 1995. It was also the sixth rate hike since the BOJ ended its ultra-loose policy in March 2024. The decision passed with a vote of 7-2, with dissenting votes cast by board members Junichi Asada and Ayano Sato. This hike was only three months after the one in June, much faster than the roughly six-month gap seen with previous hikes—indicating the rate-hike cycle itself is accelerating.

【The market didn’t follow the script】

The outside world was already highly tense, and decisions like this tend to replay the script from August 2024—back then, an unexpected rate hike by the Bank of Japan triggered a massive unwinding of yen carry trades. Within 48 hours, the dollar amount collapsed from $64,000 to $49,000. This time, after the decision was released, instead of strengthening as the carry-trade unwinding scenario would suggest, the yen weakened. The USD/JPY pair briefly surged to a two-week high near 157.9. At the press conference, BOJ Governor Kazuo Ueda deliberately avoided making any clear commitment regarding the timing of the next rate hike. The yen’s weakness suggests the market is temporarily interpreting this hike as not immediately forcing a rush to unwind carry trades—this is the biggest difference from the 2024 episode.

【The interest rate spread is still there; arbitrage trades haven’t reached the critical point】

Even if the BOJ raises to 1.25%, compared with the Fed’s 3.75%~4.00% policy rate, the spread is still 250~275 basis points. Arbitrage trades rely on this portion of the yield; until the spread shows no clear narrowing, the urgency to close positions isn’t that high. This is the key background for why Bitcoin didn’t suddenly drop right after this announcement—not that the market “doesn’t care” about the BOJ’s move, but that the arithmetic of arbitrage hasn’t been disrupted yet.

【The reaction on the crypto side】

After the decision was announced, Bitcoin held steady above $77,000. The overall crypto market value remained near $2.73 trillion, with $ETH and $SOL moving up in sync. This trend is in clear contrast with the sharp reaction after the BOJ rate hike in 2024, suggesting the market’s concerns about closing arbitrage positions were not immediately realized at the time of the decision.

【Key points to watch next】

After Ueda Kazuo’s remarks, the central bank will still consider “further rate hikes and adjusting the degree of easing” based on economic conditions, but it didn’t hint at the timing of the next move. The shift in the hiking cadence—from once every six months to once every three months—is itself a signal worth tracking. If the next rate-hike timing is brought forward even further, or if the spread narrows to the point where arbitrage becomes less profitable, that’s when the real stress test for the crypto market will begin. For now, it’s only a temporary pass—not a problem solved.

#BOJRaisesRatesTo31YearHigh