The Bank of Japan (BOJ) unexpectedly raised the cap on the 10-year Japanese government bond yields to 0.5% from 0.25%. After this, the price of Bitcoin rallied over 4%.
According to the Forbes report, the price of most traded cryptocurrency. Bitcoin climbed higher yesterday and surpassed $17,000 as the BOJ raised the cap on yields paid by long-term government bonds. This step of BOJ is defined by many as the “sudden and unexpected.”
The BOJ shocked markets recently as the Governor, Haruhiko Kuroda, announced that “the financial institution was raising the cap on 10-year government bonds to 50 basis points above or below the zero percent target.”
Back in time, the target range allowed for the yield to move 25 basis points in either direction.
Mr. Kuroda stated as “Today’s step is aimed at improving market functions, thereby helping enhance the effect of our monetary easing. It’s therefore not an interest rate hike.”
“It’s absolutely not a review that will lead to an abandonment of yield curve control or an exit from easy policy,” he said.
It can be seen that the central bank of Japan has been using an approach called yield curve control (YCC), which involves purchasing and selling bonds in order to keep their yields close to a specific target level.
The recent decline in the U.S. dollar may have proved bullish for bitcoin, as strength in the greenback has been described as providing bearish headwinds for the world’s most prominent digital currency.
The Nikkei 225, a stock index containing blue-chip Japanese stocks, also moved lower. It declined more than 2% following the announcement, additional Google Finance data reveals. And certain markets reacted strongly to this development, with the U.S. dollar falling more than 4% against the Japanese yen, as per Google Finance.
As per the media outlets reported over the weekend, the Prime Minister of Japan, Fumio Kishida, is planning on revising a decade-old accord with the BOJ and will consider adding flexibility to the agreement’s 2% price goal. Meanwhile, the reports came after a key aide to the Japanese Prime Minister who told Bloomberg earlier this month that there is a possibility of reaching a new accord with the central bank.
Moreover, as per the CNBC report, in the policy statement the BOJ stated that the move is intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.”
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
Source: https://www.thecoinrepublic.com/2022/12/21/japans-sudden-and-unexpected-policy-shift-and-its-effect-on-btc/