BOJ’s Yield Control Fails to Shake Bitcoin’s Steady Hold Above $29K

Bitcoin (BTC) remained steady above the $29,000 mark on Friday as investors closely monitored the Bank of Japan’s (BOJ) latest developments. The BOJ’s decision to maintain low-interest rates while making a slight adjustment to its yield curve control (YCC) program led to an increase in Japanese and U.S. government bond yields.

The BOJ chose to keep the short-term interest rate target at 0.1% and maintain the YCC’s 10-year government bond yield target around 0%. However, it introduced a significant change by clarifying that the 0.5% band would serve as a reference rather than a strict cap, indicating a more flexible approach to yield curve control.

Although the announcement seemed to downplay any hawkish implications, market experts interpreted the move differently. Rates strategist Rishi Mishra highlighted on Twitter that the adjustments were essentially a YCC tweak cleverly presented with semantics to soften their impact. Chris Weston, head of research at Pepperstone, noted that the new hard cap is now set at 1%, signaling a more liberal stance on controlling yields.

This decision from the BOJ comes after the International Monetary Fund (IMF) advised the central bank to move away from yield curve control and prepare for future interest rate hikes. Several investment banks had anticipated a widening of the band, with Goldman Sachs warning that a 100 basis-point band might send misleading signals to the market.

In response to the BOJ’s announcement, Bitcoin’s price remained relatively stable, hovering around $29,250 with minimal fluctuations. However, bond yields saw an increase, which presented negative signals for risk assets, including Bitcoin. The 10-year Japanese government bond yield rose by six basis points, reaching its highest level since January, while its U.S. counterpart increased by three basis points to 4.03% following an overnight gain of 13 bps.

The BOJ’s decision to relax its control over the bond market, at a time when other major central banks such as the Federal Reserve are hinting at the possibility of higher interest rates for an extended period, could pose challenges for risk assets.