Cooling inflation in Japan could pave the way for the BOJ to keep or lower interest rates, but this may still not be enough to bring money back to Bitcoin as US investors' risk appetite weakens.
Japan is becoming a macroeconomic benchmark for digital assets, especially with the JPY falling 6% this quarter and bond yields rising sharply. However, the latest CPI data has eased inflation concerns, leaving the big question as to whether crypto, particularly Bitcoin, remains a preferred choice.
- Tokyo's CPI for December reached 2%, lower than expectations of 2.7% and down from 3%, indicating that inflation is slowing.
- Cooling inflation could lead the BOJ to keep interest rates unchanged or consider lowering them to support liquidation.
- Precious metals are expected to surge in 2025, while Bitcoin's Coinbase Premium Index is at a one-month low, reflecting weakening risk appetite.
Tokyo's CPI cooled, easing inflationary pressures in Japan.
The latest CPI data shows inflation in Tokyo slowing, easing market concerns about further tightening and increasing the likelihood that the BOJ will maintain its supportive policy.
The latest CPI report shows Tokyo's CPI for December at 2%, lower than the forecast of 2.7% and down from 3% previously. This information, released in the latest CPI report , reflects a clear slowdown in inflation.
In the macroeconomic context, Japan is being closely watched due to concurrent factors: the Bank of Japan recently raised interest rates, bond yields reached record highs, and the Japanese yen depreciated by 6% this quarter. Therefore, a cooling CPI could be XEM as a "soothing" signal for inflation risks in the Japanese market, thereby impacting expectations for monetary policy and global capital flows.
The Bank of Japan (BOJ) may keep interest rates unchanged or consider lowering them to support liquidation.
Slowing inflation could put less pressure on the BOJ to tighten further, thereby increasing its ability to keep interest rates unchanged or even lower them to inject more liquidation into the system.
From a technical policy perspective, as inflation slows, the BOJ may choose to keep interest rates unchanged at its late January meeting or consider lowering them. The meeting schedule is outlined in the BOJ's late January monetary policy meeting calendar .
However, liquidation is only part of the equation. Even if the BOJ creates further easing conditions, the central question remains whether money will be willing to flow back into risky assets like cryptocurrencies, and whether Bitcoin can maintain its "hedge" Vai as it did in the past.
The flow of money in 2025 is heavily skewed towards precious metals rather than crypto.
Performance data for 2025 shows investors favoring precious metals, undermining the argument that favorable macroeconomic conditions will automatically draw money to Bitcoin.
A market update shows 2025 moving in a “one direction” with gold up +72% year-to-date (YTD) and adding $13.2 trillion in market Capital ; silver up +155% YTD and becoming the world's third-largest asset; and platinum up +159% YTD, heading towards its largest year-to-date gain ever. This information is Chia in the asset performance summary post .
It's noteworthy that even with three consecutive Fed interest rate cuts in the second half of 2025, money still flowed into metals more than digital assets. This implies that a drop in Japan's CPI may not produce a similar reaction to crypto, as the dominant factor may not be liquidation but risk appetite.
The Coinbase Premium Index fell to a one-month low, reflecting weakening risk appetite.
When risk appetite decreases, indicators of buying demand on US exchanges such as the Coinbase Premium Index may weaken, reducing the likelihood of Bitcoin benefiting solely from positive macroeconomic signals.
Under normal circumstances, macroeconomic stability could help Bitcoin's Coinbase Premium Index return to positive territory, reflecting relatively strong buying pressure from the US market. However, currently, the indicator is at its lowest level in a month.
This setup suggests the market may be witnessing a divergence between "good macroeconomic news" and "money flow behavior." Therefore, bullish bets based solely on Japanese CPI data could be risky, especially as the Bitcoin narrative as a hedge shows signs of weakening amid a preference for traditional safe-haven Capital .
Conclusion: A drop in Japan's CPI may not be enough to trigger a Bitcoin rally.
Although a decline in CPI may support expectations of easing by the BOJ, Bitcoin could still struggle to attract Capital if investors continue to prioritize safe-haven and risk-averse assets.
Cooling inflation could give the BOJ more flexibility in policy, but the market outlook for 2025 presents a different picture: precious metals are attracting strong capital inflows, while signals of cautious Bitcoin demand in the US indicate a lack of viability. This reduces the likelihood that Japan's CPI will be a strong enough catalyst for crypto in the short term.
Frequently Asked Questions
What was the December CPI in Tokyo, and how did it differ from the forecast?
Tokyo's CPI for December reached 2%, lower than the expected 2.7% and down from 3% previously, indicating that inflation is slowing.
How might falling inflation in Japan impact the Bank of Japan's interest rate decision?
As inflation slows, the BOJ may be inclined to keep interest rates unchanged at its late January meeting or consider cutting rates to support liquidation, depending on subsequent macroeconomic data.
Why does a decrease in Japan's CPI not necessarily lead to a rise in Bitcoin?
The main factor could be weakening risk appetite: 2025 money flows favor strong precious metals, and Bitcoin's Coinbase Premium Index is at a one-month low, suggesting relatively weak buying pressure from the US market.
