Crypto markets softened on Friday as a mix of rising Japanese inflation, escalating geopolitical risks from the Iran conflict, and expectations of a more hawkish stance from the Bank of Japan weighed on sentiment.
Cryptocurrency prices stayed under pressure, with Japan’s macroeconomic signals adding to uncertainty already fueled by disruptions linked to the Iran war. Bitcoin BTC $77,565.55 traded around $77,800, struggling to reclaim the Thursday peak near $78,700 reached during early Asian trading hours, according to CoinDesk data. The broader uptrend that began in late March from roughly $65,000 now appears to have lost momentum since midweek.
Ether (ETH), the second-largest digital asset, also drifted lower, changing hands near $2,300. It fell about 0.8% since midnight UTC, underperforming bitcoin’s relatively smaller 0.6% decline, highlighting mild but persistent risk-off sentiment across major tokens.
The cautious tone followed fresh inflation data from Japan, where price pressures in the services sector continued to build. The Corporate Service Price Index (CSPI) rose 3.1% year-on-year in March, slightly above expectations of 3.0%, reinforcing concerns that underlying inflation remains sticky.
Other data showed core inflation climbing to 1.8% in March from 1.6% in February, marking its first uptick in five months. Headline inflation also edged higher to 1.5% from 1.3%, though it remained below the Bank of Japan’s 2% target for a second straight month. In contrast, “core-core” inflation—which excludes both fresh food and energy—eased to 2.4%, its lowest level since October 2024.
The inflation pickup comes alongside rising energy costs tied to geopolitical tensions, particularly disruptions to oil flows through the Strait of Hormuz amid the ongoing Iran conflict. As a major crude importer, Japan is especially exposed to such shocks. West Texas Intermediate (WTI) crude futures have surged more than 40% to around $96 since the conflict escalated in late February.
Attention now shifts to the Bank of Japan’s upcoming policy meeting, where investors expect a potentially more cautious but hawkish tone. Analysts at InvestingLive noted that while rates may be held steady, officials could signal that tightening remains on the table, with June increasingly viewed as a live window if war-driven inflation persists.
Any hint of policy tightening could strengthen the Japanese yen (JPY) and ripple through global markets. With positioning data showing a relatively bearish bias toward the yen, analysts suggest there is room for a sharp rebound if the central bank turns more aggressive than expected.
A stronger yen, however, could have broader implications for risk assets. The currency has historically been used in carry trades to fund investments in higher-yielding assets globally. A rapid appreciation could trigger unwinding of those positions, potentially increasing volatility and risk aversion across markets.
Meanwhile, developments in the Iran conflict continue to add pressure on energy markets. Reports indicate Iran has deployed additional naval mines in the Strait of Hormuz, a critical chokepoint for global oil flows responsible for roughly one-fifth of seaborne crude shipments. Shipping activity through the strait has already declined sharply since the conflict intensified, according to Axios.
The Pentagon has reportedly warned lawmakers that clearing mines from the Strait could take at least six months, with operations only feasible after hostilities end. Officials also cautioned that elevated energy prices could keep U.S. inflation higher for longer, potentially complicating expectations for Federal Reserve rate cuts later in the year.
