TechFlow news — On March 21, according to Coindesk, Japan's core inflation data came in higher than expected, sparking market speculation that the Bank of Japan (BOJ) may raise interest rates, which could impact risk assets including cryptocurrencies. Data released Friday morning showed Japan’s core consumer price index, excluding fresh food, rose 3% year-on-year in February—slightly down from January’s 3.2%, but above the market forecast of 2.9%. The overall CPI declined from 4% to 3.7%.
Since November last year, Japan's overall inflation rate has remained above that of the United States, currently nearly 100 basis points higher—a divergence not seen since 2015—and highlighting persistent domestic price pressures. Both indices remain significantly above the BOJ’s 2% inflation target, validating former Governor Haruhiko Kuroda’s declaration that decades of deflation have been overcome.
This raises the possibility of yen appreciation, which historically creates volatility for risk assets such as cryptocurrencies. At the time of writing, USD/JPY was trading at 149.22, having rebounded nearly 300 points since March 11, indicating renewed yen weakness.
However, a narrowing or declining spread between U.S. and Japanese 10-year government bond yields supports yen strength. Yields across Japanese government bonds are rising, sending bullish signals for the yen. At the time of writing, Japan’s 10-year JGB yield remained above 1.5%, while the 30-year yield exceeded 2.5%, both hitting multi-decade highs.
If the yen strengthens again, it could trigger risk-off sentiment similar to that seen in August last year, with broad implications for global financial markets.
