Cryptocurrency markets remained under pressure on Friday as macroeconomic signals from Japan compounded uncertainty driven by the ongoing Iran war, stalling Bitcoin's recent uptrend.
Bitcoin (BTC) hovered near $77,800, struggling to break above Thursday's high of $78,700 during early Asian trading hours, according to CoinDesk data. The broader uptrend, which began in late March near the $65,000 mark, has appeared to stall since Wednesday. Ether (ETH), the second-largest cryptocurrency, traded around $2,300, slipping 0.8% since midnight UTC and underperforming Bitcoin's relatively modest 0.6% decline.
The cautious tone in crypto markets coincided with fresh inflation data from Japan. The Corporate Service Price Index (CSPI) rose 3.1% year-on-year in March, exceeding forecasts of 3.0%, underscoring persistent price pressures in the services sector. Additional government data showed core inflation rising to 1.8% in March from 1.6% in February, marking the first acceleration in five months. Headline inflation edged up to 1.5% from 1.3%, though it remained below the Bank of Japan's 2% target for a second consecutive month. Meanwhile, core-core inflation, which excludes both fresh food and energy, eased to 2.4%, its lowest level since October 2024.
The uptick in headline inflation aligns with rising energy costs linked to geopolitical tensions, particularly disruptions to oil shipments through the Strait of Hormuz amid the ongoing Iran conflict. Japan, a major crude importer, remains especially vulnerable to such price shocks. WTI crude futures have risen over 40% to $96 since the onset of the Iran war in late February.
Market participants are now turning their attention to the Bank of Japan's upcoming policy meeting. Analysts at InvestingLive suggest a shift in tone may be imminent. "The Bank of Japan looks set to hold fire next week but deliver a pointed warning that rates are heading higher, with June firmly in play as war-driven inflation risks build," analysts said.
Hints of tighter monetary policy and potential rate hikes could lift the Japanese yen and influence global market sentiment. It's especially plausible now, given that speculative positioning in the yen is currently bearish, according to the latest CFTC data. As a result, there is room for a sharp bullish reaction in the yen if the Bank of Japan turns hawkish.
As for the broader market impact, a stronger yen may not be favorable. Historically, the yen has been used to fund purchases of risk assets worldwide. A sudden appreciation in the currency could therefore trigger an unwinding of those trades, leading to increased risk aversion.
On the geopolitical front, Iran has deployed additional naval mines in the Strait of Hormuz this week, according to Axios. Shipping traffic through the Strait, which accounts for 20% of the world's seaborne oil, has fallen sharply since the conflict intensified. The Pentagon warned lawmakers that it would take at least six months to clear mines in the Strait, with the process only beginning after the war ends. It also cautioned that inflation in the U.S. could remain elevated this year, potentially making it harder for the Fed to cut rates.
