What It Could Mean for XRP as Bank of Japan Upcoming Rate Decision Nears

This week could bring more pressure on XRP and the broader cryptocurrency market as investors prepare for the Bank of Japan October policy meeting. 

XRP has continued to fall throughout October, and this has raised concerns about how another monetary policy change could affect its price.

Although markets expect the BOJ to keep interest rates unchanged on October 30, a hawkish message could lead to fresh volatility across the crypto market.

Bank of Japan October Meeting

Notably, markets expect the BOJ to leave interest rates unchanged at its Oct. 29-30 meeting. Prediction market data puts the chances of a rate hold at around 96%, which would leave the policy rate at 1.25%. 

For context, the Bank of Japan raised rates by 25 basis points at its September meeting, just five weeks earlier. As a result, analysts expect the bank to pause and assess the impact of that increase, with forecasts suggesting that all nine Policy Board members will support keeping rates unchanged.

However, a rate hold does not necessarily mean the BOJ will take a cautious approach to future increases. Japan’s September consumer price index (CPI) came in at 2.1%, above the central bank’s 2% inflation target. 

In its October Quarterly Outlook Report, the BOJ could confirm that underlying inflation has reached or exceeded this level, which would keep the possibility of another rate increase in December open.

Analysts widely expect the central bank to consider a further 25-basis-point increase to 1.50% at its Dec. 17-18 meeting if economic conditions remain supportive. 

This means the wording of the October policy statement and any changes to the bank’s inflation forecasts could have a greater impact on financial markets than the rate decision itself.

The Yen Carry Trade

The BOJ’s decisions matter to Bitcoin, XRP, and the broader crypto market partly because of the yen carry trade. 

For years, Japan’s low interest rates allowed investors to borrow yen at relatively low costs and use the money to buy assets offering higher returns around the world, including cryptocurrencies. 

However, as Japan has raised interest rates during its current tightening cycle, keeping these trades open has become more expensive.

Every BOJ rate hike since March 2024 has preceded a Bitcoin price decline of between 18% and 32%. One of these instances came in August 2024, when an unexpected rate increase contributed to Bitcoin falling from around $64,000 to $49,000 within 48 hours as investors rushed to close their carry trade positions.

When the yen strengthens and borrowing costs rise, investors may sell riskier assets to meet their yen-denominated obligations. Leveraged crypto positions can face greater pressure as traders reduce their exposure. 

As a result, the BOJ could unsettle the market even if it leaves rates unchanged on October 30. Hawkish guidance or a higher inflation forecast could boost the yen and prompt investors to unwind more carry trades.

The Federal Open Market Committee (FOMC) meeting on Oct. 28 may also contribute to market uncertainty, coming just two days before the BOJ’s decision. The outcome of both meetings could affect investor appetite for risk and increase price swings across the cryptocurrency market.

XRP Fragile Position Heading Into the Bank of Japan Decision

XRP faces the Bank of Japan meeting after a difficult month. The token reached $1.56 on Oct. 2 before falling steadily to a monthly low of $1.255 by Oct. 18. It is currently trading around $1.27, leaving it down approximately 14.5% in October alone.

XRP’s decline is considerably steeper than Bitcoin’s 4.4% drop over the same month. The token also remains roughly 65% below its cycle high of $3.65, while its losses for the year approach 30%.

Technical indicators suggest that XRP could face further declines. A double-top pattern has formed on its chart, while the Moving Average Convergence Divergence (MACD) indicator is showing a sell signal. 

On-chain analyst Ali Martinez has identified $1.26 as a key support level and warned that continued whale selling could push XRP toward $0.98. 

A hawkish surprise from the BOJ, whether through an unexpected rate hike or stronger warnings about future policy, could add to the selling pressure already affecting the token.