Bank of Japan may speed up rate hikes, pushing borrowing costs above 2%, ex-BOJ official warns
Jul 9, 2026, 6:42 a.m.
2 min read
Summary
- A former Bank of Japan official warns the central bank may raise its benchmark interest rate rapidly this year, potentially to above 2%, as the yen continues to weaken.
- Faster BOJ tightening could support the yen, potentially weighing over risk assets.
- BTC and yen have developed a strong positive correlation.
The Bank of Japan (BOJ) may raise its benchmark interest rate rapidly this year, as the yen slides, eventually pushing it above 2%.
That's the latest warning from a former Bank of Japan official Tsutomu Watanabe, an economics professor at the University of Tokyo who left the central bank in 1999, according to Bloomberg.
As of now, the official rate is at 1%, the result of recent hikes, and the 10-year benchmark government bond yield hovers above 2.8%, the highest in at least three decades, according to data source TradingView.
Meanwhile, the Japanese yen continues to slide despite recent hikes and hardening Japanese government bond yields. It has depreciated by 60% to 162.36 per U.S. dollar since early 2021, a major decline for one of the most traded currencies in the world. Also, it has dropped 3% so far this year.
Faster potential interest rate hikes by the BOJ may put a floor under the yen, or potentially lift it higher. The question then is whether it will help bitcoin BTC$64,466.09 or work against it.
One theory floating around in markets since long is that a sustained rally in yen could trigger an unwinding of bullish bets across advanced nation government bonds, tech stocks and even crypto that have been supposedly funded by years of cheap borrowing in yen. In such a case, risk assets, including crypto may fall.
But undercutting that theory in recent times is the strong positive correlation between the yen and BTC. Both have been falling against the dollar in lockstep.
Further, rapid rate hikes might worsen Japan's already fragile fiscal position, an argument made by several economists.
All in all, it's a complex situation.
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Why it matters:
Digital assets posted a third consecutive quarter of losses in Q2 2026, the longest losing streak since the 2022 bear market, as institutional capital rotated into AI equities and Bitcoin ETFs recorded their largest quarterly outflow since launch. Our report examines what drove the divergence, where structural adoption continued regardless, and what Q3 signals to watch.
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