The Bank of Japan just told the world it’s seriously considering another rate hike, and the timeline is measured in weeks, not quarters. Minutes from the BOJ’s April 27-28 meeting, released on May 11, reveal that three out of nine board members pushed for an immediate increase to the policy rate, citing persistent inflation risks and the need to continue normalizing monetary policy.
The central bank currently holds its short-term policy rate at 0.75%, a level it reached after a December 2025 hike that itself marked a dramatic departure from years of negative rates. Now markets are pricing in a 65.8% chance that the BOJ bumps that rate to 1% at its June meeting.
What the minutes actually say
The hawkish contingent on the board, those three members who wanted to move immediately, pointed to inflation that continues to run above the BOJ’s 2% target. The bank’s own forecasts were upgraded following the April meeting, with inflation now projected at 2.6% for fiscal 2026.
The remaining six board members weren’t necessarily opposed to hiking. They appeared more cautious about timing, with geopolitical uncertainties, including the ongoing conflict in Iran, weighing on the discussion.
Why crypto traders should care
The carry trade works by borrowing in a low-interest-rate currency (the yen) and investing the proceeds in higher-yielding assets. For years, Japan’s ultra-low rates made the yen the funding currency of choice for global risk-taking. That includes crypto.
When the BOJ raises rates, the math on those carry trades starts to break down. Borrowing in yen gets more expensive, the yen strengthens, and traders who levered up on the spread suddenly find themselves unwinding positions.
Analysts have warned that a move to 1% could trigger a 20-30% drawdown in Bitcoin as carry trade unwinding sucks liquidity out of risk assets.
The Fed factor and the tug of war
If the Fed is easing, or at least signaling that it will ease, while the BOJ tightens, the net effect on global liquidity becomes muddied. Analysts have pointed to this dynamic as a reason to moderate the more dire predictions about a BOJ-induced crypto crash.
If the BOJ moves in June and the Fed hasn’t yet signaled its next cut, there could be a window of tighter global conditions where risk assets, crypto included, face genuine headwinds.
Investors watching this space should pay close attention to two things over the coming weeks. First, any BOJ communications between now and the June meeting that confirm or walk back the hawkish tone from the April minutes. Second, the Fed’s own signals about its rate path, because the relative stance of both central banks will determine whether a BOJ hike lands as a manageable adjustment or a liquidity shock. The 65.8% probability the market currently assigns to a June hike isn’t certainty, but it’s close enough that treating it as a base case scenario seems prudent.
