BOJ Lifts Policy Rate to 1.25% as Crypto Market Stays Resilient

The Bank of Japan raised its benchmark interest rate by 25 basis points to 1.25%, the highest level in 31 years, in a move that was broadly priced in by markets. The decision followed a two-day meeting on Sept. 17–18 and marked the second hike in three months, taking borrowing costs to their highest since 1995. The policy board approved the increase 7–2, with Toichiro Asada and Ayano Sato voting against. Their dissent helped reinforce expectations that the BOJ could adopt a more gradual pace for further tightening. The BOJ is contending with renewed price pressures as it seeks to keep inflation near its 2% target. Japan's core consumer inflation rose 1.7% year over year in August, with energy costs and a weaker yen continuing to add upward pressure. BOJ Governor Kazuo Ueda is scheduled to speak at 3:30 p.m. local time, and investors will parse his remarks for signals on the next steps for rates. The yen failed to gain on the announcement, sliding as much as 0.8% to 157.145 per dollar. The reaction across broader markets was muted, and the move did not spark notable deleveraging in global assets tied to yen carry trades. Bitcoin held above $77,000 following the decision, showing little immediate sensitivity to Japan's tighter policy stance. The total crypto market capitalization hovered around $2.73 trillion. Bitcoin spot ETFs saw roughly $159 million in net inflows on Sept. 17, offering support ahead of the BOJ meeting. The BOJ's hike comes against a backdrop of ongoing tightening elsewhere. The Federal Reserve recently raised its benchmark rate by 25 basis points to a 3.75%–4.00% range, and the European Central Bank increased rates earlier this month.