On August 7, the Bank of Japan (BOJ) Deputy Governor, Shinichi Uchida, announced that it would maintain low interest rates despite ongoing financial and capital market turbulence.
He mentioned that it is essential to continue with the current level of monetary easing.
Economic Turbulence Spurs BOJ’s Low-Rate Strategy
At the Financial and Economic Forum in Hakodate City, Uchida detailed the economic challenges prompting this decision. He highlighted the rapid depreciation of the dollar and a global decline in stock prices. Uchida attributed these trends to fears of a US economic slowdown.
“We took into consideration the fact that import prices have started to rise again due to the weak yen. This is a more risk-neutral measure, as it is a risk factor that could cause consumer prices to rise,” he explained.
Read more: How to Protect Yourself From Inflation Using Cryptocurrency
The yen-to-dollar exchange rate’s significant volatility has caused a noticeable decline in Japanese stock prices relative to other countries. Uchida noted that such fluctuations in stock prices directly affect personal consumption, corporate investment behavior, and the broader economic outlook.
Separately, Arthur Hayes, co-founder of the BitMEX crypto exchange, has provided insights into Japan’s current economic situation and monetary policy. According to Hayes, Japan’s low interest rates make it an attractive environment for a financial strategy known as the “carry trade.”
A carry trade involves borrowing a currency with a low interest rate, such as the yen, and using it to buy financial assets in another currency that yield higher returns. This strategy can be profitable if the borrowed currency depreciates, as the debt becomes cheaper to repay. Conversely, it can be costly if the borrowed currency appreciates.
“Some investors hedge the currency risk; some do not. In this case, because the BOJ can print an infinite amount of yen, there is no need for Japan Inc. to hedge its borrowed yen. Japan Inc. refers to the BOJ, corporations, households, pension funds, and insurance companies. Some entities are public, some are private, but they all act together to better Nippon, or at least they intend to,” Hayes wrote in his latest blog post.
Arthur Hayes Explains Japan’s Carry Trade Opportunity for Bitcoin Investors
Griffin Ardern, Head of BloFin Research & Options, told BeInCrypto the recent decline in BTC and ETH may stem from the end of the yen-dollar carry trade. As the Bank of Japan raised interest rates to control the exchange rate, many investors who had traded BTC based on this carry trade chose to sell BTC for profits and repay yen debts, causing the price trend of BTC to align with that of USD/JPY.
Hayes argues that this creates a favorable environment for investing in high-risk assets like Bitcoin. The steady depreciation of the yen, fueled by the BOJ’s monetary policies, makes Bitcoin an attractive investment for those seeking higher returns and wealth protection.
This economic context aligns with the move from Japanese investment firm Metaplanet, which has consistently purchased Bitcoin since April. BeInCrypto reported that this strategy is influenced by the desire to reduce risks tied to Japan’s economic environment. By adopting Bitcoin as a reserve asset, Metaplanet aims to reduce its exposure to the yen.
On August 6, Metaplanet revealed its plan to issue free stock acquisition rights to raise 10.08 billion JPY. This initiative allows all common shareholders to buy Metaplanet stock from September 6 to October 15 at a predetermined price under the company’s eleventh series of stock acquisition rights.
Read more: Who Owns the Most Bitcoin in 2024?
Metaplanet will allocate 8.5 billion JPY (approximately $58.76 million) from this offering to purchase more Bitcoin. According to the latest data, Metaplanet currently holds 246 BTC, valued at around $13.98 million.
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