Former BOJ Official Warns Rates Could Top 2% as Yen Slides 60%
Updated
Updated · CoinDesk · Jul 9
Former BOJ Official Warns Rates Could Top 2% as Yen Slides 60%
1 articles · Updated · CoinDesk · Jul 9
Summary
Tsutomu Watanabe said the Bank of Japan may lift its benchmark rate rapidly this year from 1% to above 2% if yen weakness persists.
The warning follows a prolonged currency slide: the yen has fallen 60% to 162.36 per dollar since early 2021 and is down another 3% this year despite recent BOJ hikes.
Japanese bond markets already reflect tighter conditions, with the 10-year government yield above 2.8%—its highest in at least three decades.
A faster BOJ tightening cycle could support the yen but pressure risk assets, including crypto, though bitcoin has recently moved in positive correlation with the yen rather than opposite it.
Economists also warn that sharply higher rates could worsen Japan's fragile fiscal position, complicating the BOJ's response to currency weakness.
With Japan's rates set to spike, will the 'yen carry trade' finally crash global tech and crypto markets?
Is the Bank of Japan trapped between saving its currency and triggering a national debt crisis?
BOJ’s 1% Rate Hike Can’t Stop Yen’s 40-Year Low: Japan Faces Inflation and Political Pressure (2026)
Overview
As of July 2026, Japan faces a severe currency crisis, with the yen plunging to a 40-year low near 162 JPY/USD despite the Bank of Japan raising its interest rate to 1% and the government intervening with over $70 billion. These efforts have failed to stop the yen’s decline, leading to growing market skepticism and concerns that the BOJ is not acting quickly enough. The persistent weakness of the yen highlights deeper structural issues, as policy measures have had limited impact and fundamental forces continue to drive the currency lower, creating significant challenges for Japan’s economy and policymakers.