The Bank of Japan raised its benchmark interest rate by 25 basis points to 1%, reaching its highest level since 1995.

Bitcoin (BTC) rebounded from early Asian-session losses after the central bank delivered a widely expected rate increase to a 31-year high in its continued effort to fight inflation.

The move, announced around 3:19 UTC on June 16, lifted rates from 0.75% to 1%. While the decision was largely priced in, policymakers also signaled the potential for additional tightening while stressing the importance of maintaining financial stability.

The BOJ highlighted rising inflation risks, noting that higher oil prices are feeding through to consumer costs faster than anticipated amid ongoing geopolitical tensions. This keeps the door open for further rate hikes if price pressures persist.

Japan is experiencing a renewed inflation environment after years of subdued growth, with wholesale prices rising more than 6% year-on-year in May, the fastest pace in three years. Headline inflation was recorded at 1.4% in April, still below the central bank’s 2% target.

Following the announcement, Bitcoin climbed from about $65,600 to near $66,000, while the Japanese yen weakened slightly against the U.S. dollar.

Although higher interest rates are typically seen as negative for risk assets like cryptocurrencies, the BOJ’s long-standing ultra-loose policy means even gradual tightening can have complex effects on global liquidity conditions.

Bitcoin’s recovery appeared to be supported by a more dovish element in the statement: the decision to pause its bond tapering program.

By maintaining monthly Japanese government bond purchases at around 2 trillion yen from April 2027, the BOJ signaled an intent to limit upward pressure on long-term yields. This helped ease concerns over rising borrowing costs and provided some support to market sentiment.

Overall, while the rate hike was expected, the softer stance on bond purchases likely reassured investors and contributed to Bitcoin’s rebound.