Japan’s central bank is poised to push borrowing costs to a level the country hasn’t seen in over three decades. The Bank of Japan is expected to raise its short-term policy rate by 25 basis points to 1% at its June 15-16 monetary policy meeting, a threshold not touched since 1995.

Making the moment even more unusual: Governor Kazuo Ueda won’t be in the room. He’s been hospitalized, leaving Deputy Governor Shinichi Uchida to run the show and handle post-meeting communications.

The path from negative rates to 1%

The exit from negative interest rate territory has been methodical but accelerating. The BOJ hiked to roughly 0.25% in 2024, then to 0.5% in January 2025, and again to 0.75% in December 2025. A move to 1% in June would represent the fourth step up in a tightening cycle.

Economists are almost unanimously aligned on this one. A Reuters poll showed near-universal agreement that the hike is coming. Many forecasters project rates climbing further to 1.25% by the fourth quarter of 2026.

The BOJ’s April 2026 meeting offered a preview of internal tensions. The board voted 6-3 to keep rates unchanged, with three dissenters pushing for an immediate hike.

Why now, and why it matters beyond Japan

Surging energy prices, partly fueled by geopolitical tensions in the Middle East, have kept inflation stubbornly above the BOJ’s comfort zone. The board has revised its core inflation forecast for fiscal year 2026 upward to 2.8%, while simultaneously trimming growth projections.

A depreciating yen has compounded the problem. A weaker currency makes imports more expensive, which feeds directly into consumer prices. Raising rates is one of the most direct tools available to strengthen a currency, since higher yields attract foreign capital.

The carry trade works like this. Investors borrow in yen at low Japanese rates, convert to dollars or other currencies, and invest in higher-yielding assets. When Japanese rates rise, that trade becomes less attractive, and unwinding it means selling those higher-yielding assets to repay yen-denominated loans.

The last time the BOJ hiked in a way that surprised markets, in mid-2024, it triggered a violent selloff in global risk assets. The Nikkei had its worst day since the 1987 crash. Bitcoin dropped sharply. The VIX spiked.

What this means for crypto investors

Bitcoin and other digital assets have shown mixed but often negative reactions to BOJ tightening. When the yen carry trade unwinds, liquidity drains from risk assets globally.

Near-unanimous economist expectations and clear BOJ signaling mean the hike itself is largely priced in. If the BOJ signals that 1.25% is on the table by year-end, as many forecasters expect, that represents a sustained tightening trajectory that could keep pressure on carry trade positions for months. Each incremental hike narrows the interest rate differential between Japan and other major economies, making yen borrowing progressively less attractive as a funding source for speculative positions.

The wildcard is Uchida’s communication style in the post-meeting press conference. Without Ueda at the helm, any deviation from expected messaging could generate outsized market reactions simply because markets aren’t used to hearing from the deputy governor in this context.