Bank of Japan (BOJ) Governor Kazuo Ueda has signaled a more cautious stance, cooling market expectations for an interest rate hike at the upcoming April 28 policy meeting. This dovish pivot removes a key macro risk that had been looming over risk assets, including cryptocurrencies, and is seen as a supportive factor behind Bitcoin's recent breakout past $74,000.
The decision comes amid uncertainty over how the conflict involving Iran will affect Japan's economy, which is heavily exposed to oil imports through the Strait of Hormuz. Governor Ueda's remarks effectively preserve the yen carry trade, a strategy where investors borrow cheaply in Japanese yen to deploy capital into higher-yielding assets like cryptocurrencies. A surprise BOJ rate hike in August 2024 triggered an unwind of this trade, causing Bitcoin to crash from $64,000 to $49,000 within 48 hours.
Market data confirms the shift in expectations. Japan's 20-year government bond auction on Tuesday drew its strongest demand since 2019, with a bid-to-cover ratio of 4.82 against a 12-month average of 3.27. Following the auction, twenty-year yields—which had been near their highest levels since 1997—fell by nine basis points. This indicates institutional capital agrees the hiking cycle is pausing.
A dovish BOJ keeps the yen weak, currently trading near 160 against the US dollar. This sustains cheap funding for the carry trade, which in turn supports leveraged positions across risk assets. Data from last week showed $2.1 billion in new Bitcoin open interest and $2.2 billion in new Ether open interest within 24 hours following a geopolitical ceasefire, with coin-denominated metrics confirming these were net new long positions. Analysts suggest a portion of this positioning may be funded by the yen liquidity that Governor Ueda's comments have preserved.
