BOJ hawks push for June hike; markets flag crypto risk

Minutes from the Bank of Japan’s April 27-28 meeting, released May 11, show three of nine board members pushed for an immediate policy-rate increase. Markets assign a 65.8% probability that the BOJ will raise its short-term rate from 0.75% to 1% at the June meeting.

The three members cited inflation running above the BOJ’s 2% target and urged faster normalization of policy. The BOJ raised its short-term rate to 0.75% in December 2025 and has revised its inflation forecast to 2.6% for fiscal 2026. The remaining six board members favored a more cautious approach on timing, citing geopolitical uncertainties including the conflict in Iran.

Markets have responded by shifting the odds of a June hike. A rise to 1% would narrow the gap between Japanese rates and yields overseas. That gap has supported yen-funded carry trades, where investors borrow in low-yielding yen and invest in higher-yielding or higher-risk assets, including cryptocurrencies.

Higher Japanese rates would increase the cost of yen borrowing and could strengthen the currency. Traders who used yen funding to lever positions in assets such as Bitcoin could face pressure to unwind those positions if the rate differential shrinks.

Some analysts estimate a move to 1% could trigger 20% to 30% drawdowns in Bitcoin if carry-trade liquidation removes liquidity from risk markets. Market participants say the probability the market assigns to a June hike is high but not certain, and many are treating a June increase as the base case while watching for signs that could change the outlook.

Traders and investors are monitoring two items ahead of the June meeting: any BOJ communications that confirm or soften the hawkish tone in the minutes, and guidance from the U.S. Federal Reserve on its rate path. If the Fed signals cuts while the BOJ tightens, the combined effect on global liquidity would differ from a scenario in which the Fed maintains firmer policy as the BOJ raises rates.