Japan's higher-than-expected core inflation triggers expectations of a rate hike, or impacts the crypto market
On March 21, it was reported that Japan's core inflation rose 3% year-on-year in February, down from 3.2% in January, but still higher than the market's expectations of 2.9%, with headline CPI dropping from 4% to 3.7%, still well above the central bank's target of 2%. Currently, Japan's inflation level is nearly 100 basis points higher than the U.S., the largest gap since 2015, and with the Shunto wage talks pushing up salaries, market expectations for a Bank of Japan (BOJ) rate hike have risen.
The crypto market may come under pressure as a stronger yen usually leads to increased risk aversion in the market. As of now, the US dollar is trading at 149.22 against the Japanese yen (USD/JPY), having retreated nearly 300 pips since 11 March. While the U.S. and Japan 10-year bond yield spread narrowed, Japan's 10-year bond yield has risen to more than 1.5%, the 30-year interest rate exceeded 2.5%, both at decades high, reinforcing the trend of yen strength. If the yen continues to strengthen, it may trigger a global risk asset correction that could put pressure on the crypto market, similar to the August 2023 wave of market risk aversion.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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