The Bank of Japan appears ready to do something it spent decades avoiding: raise interest rates twice in a single year. Market watchers are pricing in a 25 basis point hike at the June 15-16 policy meeting, which would push Japan’s benchmark rate to 1.0% for the first time since the mid-1990s.

A second hike later in 2026 would bring the rate to 1.25%, marking a pace of tightening that would have seemed unthinkable just a few years ago from a central bank that practically invented ultra-loose monetary policy.

What the numbers say

Market pricing currently reflects roughly an 80% probability that the BoJ will hike next week.

A Reuters poll conducted May 7-14 backs that up: 65% of the 62 economists surveyed expect Japan’s policy rate to hit 1.0% by end of June. Nearly all of those economists anticipate a hike arriving by end of September at the latest, with the median forecast pointing to 1.25% by the fourth quarter of 2026.

The current rate sits at 0.75%, already the highest since 1995 after a December 2025 increase. At the April 2026 meeting, the bank voted 6-3 to hold rates steady, but three members dissented in favor of hiking immediately.

Carlyle Japan expects two 25 basis point hikes over the course of 2026. BoJ officials have reportedly signaled they are prepared to discuss a June hike unless Middle East tensions escalate dramatically.

Why now: inflation and geopolitics

The BoJ now projects core inflation at 2.8% for fiscal year 2026, well above its long-standing 2% target. A significant driver of that persistent inflation is the ongoing conflict involving Iran, which has pushed energy costs higher globally. Japan, as a major energy importer, feels those price pressures acutely.

The BoJ has simultaneously lowered its growth expectations slightly, creating a mild stagflationary dynamic.

What this means for crypto investors

The yen carry trade has been one of the most consequential dynamics in global financial markets for years. The mechanism is straightforward: investors borrow cheaply in yen, convert to dollars or other currencies, and deploy that capital into higher-yielding assets, including crypto. When the BoJ raises rates, it makes those yen-denominated loans more expensive, reducing the incentive to maintain those positions.

Historical patterns show a correlation between BoJ tightening cycles and increased volatility in Bitcoin prices, although market reactions have not always been immediately pronounced.

BTC traders should be watching the BoJ meeting outcome on June 16. The initial market reaction may be muted if the hike matches expectations, but the forward guidance—specifically any signals about the pace and timing of the next increase—could move markets more than the decision itself.

The yen strengthening against the dollar is another channel to monitor. A stronger yen mechanically reduces the returns on carry trades, potentially triggering unwinds that cascade through risk assets. If USD/JPY moves sharply on the announcement, crypto markets could see corresponding volatility within hours.