Bitcoin (BTC $88,754.76) and the Japanese yen, which have recently moved in near lockstep, traded largely unchanged on Friday following Japan’s first slowdown in inflation in four months and the Bank of Japan’s decision to keep interest rates steady.
Japan’s headline consumer price index (CPI) eased to a 2.1% year-on-year pace in December, down from November’s 2.9%, according to the Ministry of Internal Affairs and Communications. Core inflation, which excludes fresh food prices, also slowed to 2.4% from 3% in November.
However, underlying price pressures remained resilient. Core-core inflation — which strips out both fresh food and energy — edged down only slightly to 2.9% from 3% in November. Analysts at ING noted that “aside from monthly fluctuations caused by energy subsidy programs, underlying price pressures remain persistent.” They added that while persistent core-core inflation could support further policy normalization, slower headline and core inflation may prompt a more cautious, wait-and-see approach in the coming months.
Later Friday, the Bank of Japan kept its benchmark borrowing rate at 0.75% in a near-unanimous decision, while raising its growth and inflation forecasts for fiscal 2025 and 2026, citing continued support from expansionary fiscal policy.
Bitcoin remained largely listless near $90,000, while the yen dipped just over 0.2% to 158.70 per U.S. dollar. Some strategists expect the yen to remain weak in the near term — a potential bearish signal for Bitcoin given the recent strong correlation between the two, with a 90-day correlation coefficient of 0.84.
The 10-year Japanese government bond (JGB) yield rose 3 basis points to 1.12%, reflecting persistent fiscal concerns and market expectations for future BOJ rate hikes amid underlying inflation and higher growth projections. Yields earlier this week hit multi-decade highs on worries that election-related tax cuts could strain Japan’s fiscal position.
Rising Japanese yields have also increased borrowing costs globally, including in the U.S., weighing on risk assets such as equities and Bitcoin. Bitcoin dropped over 4.5% to $88,000 on Tuesday before recovering slightly, with prices holding mostly flat over the past 24 hours, according to CoinDesk data.
