- Bank of Japan’s rate hikes could trigger new cryptocurrency market turmoil.
- Japan’s crypto market share declines as the Prime Minister’s departure looms.
As a seasoned researcher who has witnessed the rollercoaster ride that is the global financial market, I can’t help but feel a sense of déjà vu when analyzing these recent developments. The Bank of Japan’s potential interest rate hike and the looming departure of Prime Minister Fumio Kishida have sent ripples through the cryptocurrency market, reminding us that the crypto world is not immune to the turbulence of traditional finance.
The unpredictable fluctuations in the worldwide financial market, particularly with cryptocurrencies, have sparked worries about potential impacts from significant monetary moves
As an analyst, I find myself reflecting on the anticipated interest rate reductions by the Federal Reserve, which have sparked some apprehension. In fact, George Lagarias, the chief economist at Forvis Mazars, has voiced his concerns that such aggressive Fed rate cuts could potentially bring about substantial risks to the market
Bank of Japan’s rate hike decision
Amidst growing uncertainties, Bank of Japan’s governor, Kazuo Ueda, stated on September 3rd that the bank may further increase interest rates should the economic scenarios match their forecasts
Just a heads-up, on August 5th, Japan’s stock market suffered a steep fall – its largest decline in nearly 37 years – dropping by 12% within a single trading day
The accident occurred partially because some investors employed a strategy called “carry trade,” which involved using Japan’s low interest rates to borrow yen and buy profitable U.S. investments on credit
The aftermath was intense, leading major tech companies such as Apple and Nvidia to experience substantial decreases. However, it was the cryptocurrency market that suffered most, experiencing its single largest one-day decline since the year 2023
Furthermore, Bitcoin (BTC) and Ethereum (ETH) experienced drops of over ten percent, whereas coins such as Solana and Dogecoin fell by as much as thirty percent
This massive sell-off resulted in approximately $1.14 billion in liquidations and erased nearly $600 billion from the market cap.
Therefore, the possibility that the Bank of Japan might increase interest rates has sparked worries of yet another period of financial turbulence
Is Japan’s crypto market on a decline?
During a recent meeting with representatives from the Liberal Democratic Party, Genki Oda, head of SBI-owned BITPOINT and leader of the Japan Cryptocurrency Exchange Association, underscored Japan’s decreasing influence within the international cryptocurrency market
Oda observed that Japan’s substantial control over Bitcoin trading, which accounted for nearly half of the worldwide volume between 2017 and 2018, has significantly decreased to just a small portion by 2024. This suggests a notable decrease in Japan’s involvement with cryptocurrency
“It’s been raised as a potential issue that Japan’s stringent tax regulations might cause a drop in the global competitiveness among Japanese companies operating within the web3 sector.”
What to expect?
Given these recent changes, Japan’s Financial Services Agency (FSA) put forth a proposal for tax revision on August 30th
Concerning the handling of taxes for cryptocurrency trades, it’s proposed that cryptocurrencies should be categorized as financial assets and considered as potential investments for the general public
Implementing these regulations might lead to more transparent rules for digital assets, possibly lowering taxes and stimulating increased public involvement in this sector
Given Prime Minister Fumio Kishida’s decision to resign in September, the path of Japan’s economy and how it may influence the crypto market is now a fascinating subject for consideration
In summary, Kishida’s resignation could potentially lead to changes in policies that impact not only the overall financial sector but also shape the regulatory atmosphere surrounding digital currencies
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2024-09-05 23:14