Japanese Inflation Puts Bitcoin Under Pressure Ahead of December
Rising core inflation increases the odds of a BOJ hike in December, while the Fed could also move. That could put extra pressure on the yen carry trade and Bitcoin’s price.
Key Takeaways
- Japan’s core inflation rose to 2.1% in September, moving above the Bank of Japan’s target for the first time in nine months.
- Many analysts expect the Bank of Japan to raise rates to 1.50% in December, while the Federal Reserve may also move then.
- Bitcoin is under pressure, trading at $81,293, and has lost 5.6% over the past month, partly because of concerns about higher Japanese rates and the yen carry trade.
Japan’s core inflation rose above the Bank of Japan’s 2% target in September for the first time in nine months. That increases the odds of a rate hike in December, right as the Federal Reserve may also move. Bitcoin is already under pressure and is heading into that period at a lower level than earlier this month.
Inflation Is Rising in Japan
Core inflation, excluding fresh food, rose to 2.1% from 1.7% in August, Reuters reported. A broader measure excluding fuel came in at 2.4%, compared with 1.9% a month earlier. Price pressure also widened beyond energy and food: goods became 2.8% more expensive, and services inflation rose to 1.5%.
The Bank of Japan will review these figures in its new forecasts during the two-day policy meeting that ends on October 30. The central bank is not expected to make a move next week, but the tone of its guidance could still matter for the market.
December Will Matter for BTC
The Bank of Japan raised its policy rate in September to 1.25%, the highest level since 1995. In a Reuters poll, many analysts expect a move to 1.50% in December, with even higher levels possible later on. At the same time, the U.S. market is pricing in a high chance that the Fed will also raise rates in December.
For Bitcoin, the key point is that higher Japanese rates could hit the yen carry trade. In that trade, investors borrow yen cheaply to take on more risk elsewhere. If that position gets unwound, it could add extra volatility to the crypto market. Japan’s recent rate hikes have also already led to more capital staying at home and less flowing into foreign assets. That fits with the broader weakness in the market, where Bitcoin fell below $82,000 after a wave of liquidations.
Why This Matters for Crypto
Bitcoin is sensitive to changes in rate expectations, especially when two major central banks are in focus at the same time. The coin had already dropped sharply after the BOJ raised rates in July 2024. It is vulnerable again now: at the time of writing, Bitcoin was at $81,293 (€72,600), down 3.16% from 24 hours earlier, and down 5.6% over the past month.
The coin peaked above $86,000 (€76,800) in early October, but recovery attempts since October 9 stalled below $84,000 (€75,000). If the BOJ takes a more hawkish tone on October 30, that could draw extra attention to the interaction between Japanese rates, the dollar, and Bitcoin.
