Bank of Japan set to hike rates to 31-year high, and crypto markets are watching closely

Japan’s central bank is about to do something it hasn’t done in over three decades. The Bank of Japan is widely expected to raise its benchmark interest rate to 1% at its June 15-16 policy meeting, a level not seen since 1995.

What’s driving the hike

The anticipated move would lift the BOJ’s uncollateralized overnight call rate target from 0.75% to 1%. The previous increase came in December 2025, when the rate was bumped to 0.75%.

The catalyst this time is familiar: inflation that won’t sit down and behave. A depreciating yen has been making imports more expensive, while rising energy costs, fueled in part by ongoing geopolitical tensions in the Middle East, have added fuel to inflationary pressures.

The market has already made up its mind on this one. A Reuters poll found that 94% of economists expect the June rate hike to happen. Market pricing supports that view, with over 80% probability baked into current expectations.

Some forecasters are already penciling in another hike to 1.25% before the end of 2026.

A leadership curveball

BOJ Governor Kazuo Ueda is expected to miss the June meeting due to health issues. That leaves Deputy Governor Shinichi Uchida to steer the ship during what could be the most consequential BOJ decision in years.

Uchida’s task goes beyond simply announcing a rate increase. He’s also expected to recalibrate the BOJ’s forward guidance, potentially dialing back some of the hawkish signaling that has characterized recent communications.

Why crypto traders should care

The BOJ’s monetary policy has long functioned as one of the global financial system’s key liquidity spigots. For decades, Japan’s rock-bottom rates made the yen a favorite funding currency for the carry trade, where investors borrow cheaply in yen and deploy capital into higher-yielding assets, including crypto.

Previous BOJ rate hikes have coincided with significant Bitcoin drawdowns, with declines of 20-30% observed in certain instances following tightening moves.

The July 2024 episode remains fresh in the market’s memory. When the BOJ hiked rates unexpectedly, the resulting yen carry trade unwind triggered a cascade across global risk assets. Bitcoin was not spared.

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