Bitcoin (BTC) continues to trade above $34,000 after the Bank of Japan (BOJ) loosened its grip on the “yield curve control” (YCC) program, thwart the Federal Reserve’s liquidity crunch.
At press time, the leading cryptocurrency by market value changed hands at $34,300, representing a 0.18% decline on a 24-hour basis, according to CoinDesk data.
On Tuesday, the central bank maintained its short-term key rate at -0.1%, continuing its negative interest rate policy. However, the BoJ said it would view the 1% upper limit on the 10-year government bond yield as a “benchmark” rather than a hard cap. This adjustment will allow more swings in yields and ease pressure on the BOJ to intervene with liquidity-increasing bond purchases whenever the 10-year yield tests the old hard cap of 1%.
The BoJ’s decision is in line with that of Monday Nikkei Report, who said the bank would take a more flexible stance, allowing the benchmark yield to exceed 1%. The US dollar-Japanese yen (USD/JPY) pair rebounded to 150 from 149.20, a sign that the Nikkei report overnight indicated that traders expected the BOJ to move the hard cap to 1.25 % or 1.5%.
Some observers say the BOJ’s latest change represents a stealth move away from the dovish YCC program, which calls for caution from traders of liquidity-sensitive risk assets, including cryptocurrencies.
“The BOJ’s key paragraph – 1% is now the “soft” upper limit (benchmark) and will not be enforced as strictly. That, and the upward revision to inflation forecasts, means this is THE most hawkish BOJ in some time… but not as hawkish as the Nikkei leaks suggest,” said Rishi Mishra, strategist in rate. said on X.
The International Monetary Fund (IMF) urged the BOJ must abandon YCC and prepare for possible tightening or rate hikes.