TLDR
- The Bank of Japan is expected to raise its key interest rate from 0.75% to 1.0% at its June 15–16 meeting
- 65% of economists in a Reuters poll back a June hike; nearly all expect one by September
- Three of nine BOJ board members already voted for a hike at the April meeting
- The Iran war has pushed Japan’s core CPI forecast for fiscal 2026 to 2.8%, well above the 2% target
- Higher BOJ rates could strengthen the yen and trigger sell-offs in risk assets, including crypto
The Bank of Japan is moving closer to raising interest rates again. Most economists now expect the BOJ to lift its policy rate from 0.75% to 1.0% at its June meeting, driven by rising inflation tied to the ongoing war in Iran.
Japan’s 10-year government bond yield climbed above 2.6% on Thursday, scaling its highest levels since 1997
BoJ rate hikes continue @teconomics pic.twitter.com/LdCsn2IM1q
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) May 14, 2026
A Reuters poll conducted May 7–14 found that 65% of economists — 40 of 62 — forecast a rate hike by end-June. Nearly all respondents expect a hike before the end of September.
The BOJ held rates steady at its April 27–28 meeting. But that decision was far from unanimous. Three of the nine board members voted to raise rates immediately, one of the most divided votes the BOJ has seen in recent memory.
Board member Kazuyuki Masu, who voted to hold in April, said on Thursday that the BOJ should raise rates “as soon as possible” if there are no clear signs of economic slowdown. His comments suggest he may back a hike in June.
The Iran war has been the main driver of Japan’s inflation problem. Oil prices have climbed as a result of the conflict, pushing up import costs for Japan, which relies heavily on energy imports.
The BOJ has revised its core CPI forecast for fiscal 2026 upward to 2.8%. That is well above its 2% target and is putting pressure on policymakers to act.
Why the Yen Is Adding Pressure
Japan’s currency has also become a major factor in the rate debate. The yen has slid past 160 per dollar, prompting Japanese authorities to intervene in currency markets.
The government has spent roughly 10 trillion yen — around $63.35 billion — in recent weeks to support the yen. But many economists say currency intervention alone is not enough without higher interest rates to back it up.
Nomura Securities chief economist Kyohei Morita said the BOJ would likely raise rates in June to address price risks from yen weakness. A weaker yen raises the cost of imports and adds to inflation.
Japan’s policy rate at 0.75% is still below the neutral rate — the level that neither stimulates nor slows the economy. With inflation running near 2.8%, real borrowing costs remain deeply negative.
Almost three-quarters of poll respondents said sustained inflation is a bigger threat to Japan’s economy than a demand slowdown over the next 12 months.
What This Could Mean for Crypto and Global Markets
A BOJ rate hike would have effects beyond Japan. The yen is widely used in carry trades, where investors borrow in low-cost yen and invest in higher-yielding assets elsewhere.
When Japanese rates rise, that trade becomes less attractive. Investors tend to unwind these positions, pulling money out of assets like US Treasuries, emerging market equities, and cryptocurrencies.
Higher rates also tend to strengthen the yen, which reduces the incentive for Japanese investors to buy foreign assets. That pullback in capital can create selling pressure across risk assets, including Bitcoin.
Market pricing on Polymarket shows a 65.8% probability of a 25 basis point hike at the June 15–16 BOJ meeting.
Median forecasts from the Reuters poll put the BOJ rate at 1.25% by the fourth quarter of 2026, rising to 1.50% in the third quarter of 2027.
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