Fed and Bank of Japan Put Yen and Carry Trade Under Pressure
The simultaneous rate meetings could affect the yen carry trade and dollar liquidity. That also makes this week especially relevant for Bitcoin and other crypto.
Key Takeaways
- Traders are factoring in rate hikes from both the Federal Reserve and the Bank of Japan in the same week.
- The market expects the Fed to raise rates by 25 basis points and the BOJ could move to 1.25%.
- For crypto, this matters because tighter policy moves can affect the yen, the dollar, and risk appetite.
Traders are factoring in a rare moment this week when both the Federal Reserve and the Bank of Japan could raise rates almost at the same time. The Fed will announce its decision on Wednesday, while the BOJ follows on Friday. For the crypto market, that matters especially because moves like these can affect the yen, the dollar, and broader risk appetite.
Fed and BOJ in the Same Week
The futures market is now pricing in more than an 80% chance of a 25 basis point hike for the Fed. For the Bank of Japan, 89% of the 18 economists in a CNBC survey from September 9 through 14 expect a 25 basis point hike to 1.25%, a new high in three decades. They point to rising inflation, higher wages, and pressure from Washington.
Not everyone sees the same path. Takahide Kiuchi of Nomura Research Institute told CNBC that the Trump administration effectively shut down any possible attempt by a Takaichi administration to block the rate hike. Jesper Koll of Monex Group, on the other hand, expects a bigger 50 basis point move, while Carlos Casanova of Union Bancaire Privée thinks the BOJ will stay on hold for now.
Why This Matters for Crypto
The Fed and the Bank of Japan have had very different interest rates for years. That made the yen carry trade popular, with investors borrowing cheap yen to move into higher-yielding investments elsewhere. If both central banks tighten in the same week, that could change money flows and liquidity in global markets.
For Bitcoin and other crypto, that matters because the Fed often feeds into broader risk appetite. A stronger dollar or less room for carry trades can affect the tone in the crypto market, even if the impact cannot be pinned to one direction ahead of time. The Fed’s dot plot and any dissenting votes at the BOJ are also getting extra attention. Earlier, a divided Fed decision already showed how quickly the market can react to a hawkish surprise.
Yen and Dollar in Focus
According to 61% of the economists surveyed, the yen will trade between 155 and 160 per dollar over the next month. The recent repricing of Fed odds came alongside a monthly gain for the yen against the dollar. That fits into a broader picture where several major central banks could tighten in the same period, something that has not happened since 2006.
