Bitcoin falls as Bank of Japan stance revives carry trade fears

Tuesday 28 April 2026 - 13:39

By: Dakir Madiha

Bitcoin falls as Bank of Japan stance revives carry trade fears

Bitcoin fell below $77,000 after the Bank of Japan signaled a more hawkish policy direction despite keeping interest rates unchanged at 0.75 percent. The cryptocurrency dropped as low as $76,400 during early US trading, as investors reacted to growing expectations that Japanese rates could rise again in June.

The Bank of Japan voted 6 to 3 in favor of maintaining rates, but the unusually strong dissent inside the policy board unsettled markets. Three members supported an immediate increase, a sharper division than seen at the previous meeting. The central bank also raised its core inflation forecast for fiscal 2026 from 1.9 percent to 2.8 percent and reaffirmed guidance that rates would continue to rise over time.

Markets interpreted the decision as hawkish despite the absence of an immediate rate increase. Investors focused on the stronger inflation outlook and the shift in tone from policymakers previously viewed as cautious. Analysts noted that the stance suggests the Bank of Japan is becoming more willing to tighten policy if inflation pressures persist.

The Japanese yen strengthened after the announcement, causing the USD/JPY pair to retreat. This movement matters for global risk assets because of the yen carry trade, a strategy where investors borrow cheaply in yen to finance investments in higher yielding or speculative assets such as cryptocurrencies. As Japanese rates rise and the yen appreciates, these trades become less attractive and liquidity conditions tighten.

The relationship between Japanese monetary policy and crypto markets has become increasingly visible since 2024. Rising Japanese bond yields have already reduced the profitability of low cost yen borrowing. Previous Bank of Japan tightening moves triggered sharp declines in Bitcoin, including a 24 percent collapse during a major unwind of the yen carry trade in August 2024.

Broader macroeconomic pressures are also weighing on digital assets. Brent crude climbed above $104 per barrel amid tensions around the Strait of Hormuz, increasing inflation concerns ahead of the next Federal Reserve meeting. Ethereum also declined, falling nearly 3 percent during the session.

Market participants are now closely watching the yen and future Bank of Japan decisions. Analysts warn that further appreciation of the Japanese currency could accelerate the unwinding of leveraged positions across global markets, creating additional volatility for cryptocurrencies and other speculative assets.