The Bank of Japan raised its policy rate by 25 basis points to 1% on 16 Jun – the highest level since 1995 – citing risks that oil-driven inflation will spread to consumer prices and push underlying inflation above its 2% target.
BoJ Raises Rate to 31-Year High of 1%, Yen Back in Intervention Zone
16 June 2026 - 08:00 CEST
By Oihyun Kim
The 7-1 decision drew a dissent from board member Toichiro Asada, who argued that downside risks to output and employment outweighed upside risks to prices. Governor Kazuo Ueda, hospitalized last week for an infected liver cyst, submitted his views in writing but did not vote.
Charu Chanana, chief investment strategist at Saxo in Singapore, told Reuters the hike "was not hawkish enough to force a major yen repricing."
Bond purchases to stay steady
In a separate move, the board agreed to pause its long-running bond purchase taper from April 2027, keeping monthly buying steady at around ¥2tn ($12bn). Board member Naoki Tamura dissented, arguing the taper should continue through the first quarter of 2028.
The yen traded at ¥160.23 against the dollar after the decision, returning to levels that prompted the Ministry of Finance’s record ¥11.7tn ($73bn) intervention in April and May. The Nikkei 225 climbed above 70,000 points for the first time, as the relatively dovish tone kept the yen weak and supported exporters.
Yen carry trades face renewed pressure
The rate increase adds direct pressure to yen-funded carry trades, a popular strategy in which investors borrow in yen to buy higher-yielding assets, including cryptocurrencies. Bitcoin fell from around $65,000 to below $50,000 in the days after the BoJ’s July 2024 hike. Japanese listed Bitcoin treasury firms such as Metaplanet, which have financed purchases through debt and equity issuance, now face higher yen funding costs.
A Bloomberg survey of BoJ watchers points to roughly one hike every six months. However, former BoJ chief economist Hideo Hayakawa told Bloomberg the next move could come as soon as October. Prime Minister Sanae Takaichi, who favours accommodative policy, recently urged Governor Ueda to align policy with government measures.
