Japan's Core Inflation Exceeds Expectations, Sparking Interest Rate Speculation

According to Odaily, Japan's latest core inflation data has surpassed market expectations, prompting discussions about a potential interest rate hike by the Bank of Japan (BOJ) and its impact on risk assets, including cryptocurrencies. The data reveals that Japan's core Consumer Price Index (CPI) rose by 3% year-on-year in February, slightly down from January's 3.2% but still above the anticipated 2.9%. Meanwhile, the overall CPI decreased from 4% to 3.7%, yet remains significantly above the BOJ's 2% inflation target. Since November 2024, Japan's inflation rate has consistently exceeded that of the United States, currently standing nearly 100 basis points higher, marking the largest gap since 2015. The ongoing 'Shunto' wage negotiations are adding pressure for wage increases, further fueling expectations of a BOJ rate hike. Such expectations have strengthened the yen, but a significant appreciation could trigger risk aversion in the market, potentially affecting risk assets like Bitcoin. As of the report, the USD/JPY exchange rate is at 149.22, having rebounded nearly 300 basis points since March 11, indicating a short-term weakening of the yen. However, the narrowing yield spread between U.S. and Japanese 10-year government bonds, with Japan's 10-year yield remaining above 1.5% and the 30-year yield surpassing 2.5%, both at multi-decade highs, could support a stronger yen. The market is closely monitoring the BOJ's future policy direction and its implications for global financial markets.