Citi warns BoJ could deliver multiple rate hikes if yen stays weak
Citigroup’s Head of Markets in Japan, Akira Hoshino, warned that the Bank of Japan (BoJ) may lift interest rates by 300 basis points this year — potentially three 25bp hikes (April, July, and before year-end) — if the yen remains weak. Hoshino flagged the yen’s decline (recently around ¥158–¥159.45) as driven by negative real interest rates and rising inflation pressure, which has pushed BOJ officials to re-evaluate exchange-rate effects on prices. Market pricing shows high odds of further hikes, including a ~90% chance of a December increase based on swap markets. Hoshino expects the USD/JPY range to be 150–165 and says higher domestic yields above inflation could trigger repatriation of foreign investments into Japanese fixed income — a dynamic that would benefit Citigroup’s traders and sales teams. He also plans closer collaboration with investment banking to capture deal-making and financing flows in Japan as yields and rates evolve. Key implications: potential BoJ tightening in response to yen weakness, stronger demand for JPY assets if yields rise, and increased trading flows around FX and Japanese fixed income.
Neutral
Direct crypto exposure in the article is minimal — the story centres on FX and Japanese monetary policy. For crypto markets, the implications are indirect. A weaker yen that forces BoJ tightening could strengthen JPY and Japanese fixed-income yields; that environment often increases demand for low-risk, yield-bearing assets and can tighten global liquidity. In the short term, tighter monetary policy and stronger JPY can be marginally bearish for risk assets, including crypto, by reducing speculative dollar liquidity. However, effects are likely modest and diffused across global markets rather than crypto-specific. If yields rise and capital repatriation to Japan accelerates, it could draw some capital away from risk-on assets, weighing on crypto prices. Conversely, increased FX volatility (USD/JPY moves) can boost trading volumes and derivatives activity among crypto-prop desks and macro-focused traders, creating opportunities for short-term volatility-driven strategies. Overall, because the report signals potential BoJ tightening rather than an immediate shock, the expected impact on crypto is neutral to mildly negative in the short term, and depends on broader global liquidity and risk appetite in the medium term. Historical parallels: US tightening cycles that reduced excess liquidity often pressured crypto (e.g., 2022 Fed hikes), while FX-driven volatility has sometimes increased trading volumes without a directional long-term effect on crypto valuations.