Is the Yen's rebound hopeless? Sanae Takaichi persuades Kazuo Ueda "not to raise interest rates," BOJ may hold steady in March

According to Japan’s Mainichi Shimbun on Tuesday, citing sources familiar with the matter, Japanese Prime Minister Sanae Takaichi conveyed concerns about further interest rate hikes during a meeting with Bank of Japan Governor Kazuo Ueda last week. Following the news, the yen weakened against the US dollar and euro. If true, Takaichi’s recent refusal to support additional rate increases could complicate the BOJ’s timetable for tightening, as markets had widely expected the BOJ to possibly raise rates again as early as March or April.
(Background: Weak Yen Triggers Inflation Red Line: BOJ May Be Forced to Hike Rates Early)
(Additional context: Countdown to BOJ Rate Hike — Will Crypto Markets Repeat the Downtrend?)

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• Both sides have their statements; details remain unclear
• Market reaction: Yen weakens
• Why should crypto markets pay attention?

According to Mainichi Shimbun, Japanese Prime Minister Sanae Takaichi explicitly expressed concerns about further rate hikes during her meeting with BOJ Governor Kazuo Ueda last week. This marks the first time since taking office that she has reportedly privately pressured the central bank to pause its tightening policies.

Both sides have their statements; details remain unclear

Ueda’s response to the meeting was relatively cautious. He stated that last week’s discussion mainly involved general exchanges on economic and financial conditions and emphasized that the Prime Minister did not make any specific monetary policy demands.

Takaichi, on her part, declined to comment on the details of the meeting, only saying she hopes the BOJ will work closely with the government to achieve a 2% inflation target along with wage growth. However, if Mainichi’s report is accurate, Takaichi’s resistance to rate hikes could make coordination between the BOJ and the new government more challenging.

Market reaction: Yen weakens

After the news broke, the yen depreciated against both the US dollar and euro. Market interpretation suggests that if the Prime Minister publicly or privately opposes rate hikes, the BOJ might be forced to delay its tightening schedule under political pressure.

The timing of this meeting is particularly sensitive — market speculation had previously suggested that, due to the yen’s persistent weakness pushing up living costs, the BOJ could raise rates again as early as March or April. The BOJ only raised its benchmark rate to 0.75% in December last year, the highest in 30 years.

Why should crypto markets pay attention?

For crypto investors, the BOJ’s interest rate decisions have historically influenced global risk asset trends. Since 2024, every unexpected rate hike by the BOJ has been accompanied by Bitcoin dropping over 20%, primarily due to the unwinding of yen carry trades — when the yen appreciates and interest rate differentials narrow, large positions financed in low-interest yen to invest in high-risk assets are forced to liquidate.

If Takaichi is indeed secretly restraining the BOJ’s rate hike pace, short-term global liquidity tightening pressures could ease, which might be a positive signal for risk assets. However, in the medium to long term, continued yen depreciation would further boost domestic inflation pressures in Japan, potentially forcing the BOJ to accelerate rate hikes again, which could lead to more intense market shocks.