The Bank of Japan (BOJ) may lead to large changes in the global market flows, which might have an effect on cryptocurrencies, claims CoinDesk. The unknown policy direction of the BOJ, in the opinion of volatility trader Gryphon Ardern from the crypto asset management company Blofin, increases the likelihood that it would shock the market beyond expectations. In order to guide short-term interest rates at minus 0.1% and the yield on 10-year government bonds at about 0%, the BOJ has been using yield curve control (YCC) since 2016. With the addition of trillions of dollars in new global liquidity and the widespread use of carry trades, these initiatives to increase liquidity have pushed down global bond yields.
The Japanese yen may strengthen as a result of a potential unwinding of the BOJ’s zero interest rate policy and yield curve management, which would then affect risk assets such as cryptocurrencies. Similar views were expressed by Charles Schwab earlier this year, who said that the carry trade can quickly unwind and cause excessive cross-market volatility. The majority of analysts surveyed by Reuters between September 8 and September 19 predicted that the BOJ would stop its negative interest rate policy and curtail its curve control programme in 2019. As a result of higher-than-expected inflation, a weaker-than-expected Japanese yen, rising global oil prices, and other factors, according to ING, the central bank may give away some of the details of its upcoming hawkish move on Friday.