Bank of Japan to raise rates to 1% amid inflation pressures

The Bank of Japan is expected to lift its short‑term policy rate from 0.75% to 1% at the June 15‑16 monetary‑policy meeting, the highest level since 1995. Governor Kazuo Ueda will miss the two‑day session because of treatment for an infected liver cyst, leaving eight board members to vote on the hike. The move is driven by rising inflation – higher energy costs linked to the Middle‑East conflict, a weak yen and tightening labour market – and is seen as the first step in normalising Japan’s ultra‑low‑interest stance.

Markets have largely priced in the increase and are now focusing on the timing of future hikes, with a Reuters poll projecting a possible rise to 1.25% in the fourth quarter. Analysts warn the rate hike could unwind the yen‑carry trade that has financed risk assets worldwide, potentially triggering a liquidity squeeze and a sell‑off in Bitcoin, which has already seen open‑interest and leverage fall.

The policy shift also has broader implications: higher borrowing costs for households, improved returns for savers, wider margins for banks, and reduced attractiveness of yen‑funded investment flows that affect global currency and asset markets. The yen hovers near 160 per dollar, keeping the prospect of intervention alive.