OdailyDepth, in an article by Qin Xiaofeng (@QinXiaofeng888), reported that the Bank of Japan is expected to raise its short-term policy rate from 0.75% to 1.0% at the monetary policy meeting scheduled for June 15-16, citing Nikkei. If implemented, the rate would reach its highest policy level since 1995. Market pricing has shifted sharply: on PolyMarket, the probability assigned to a “25bp rate hike” has climbed from 25% in early April to 98%.
The reason this policy decision matters beyond Japan is the yen carry trade. For more than a decade, investors have borrowed low-cost yen and used the proceeds to buy higher-yielding assets such as U.S. equities, technology shares, emerging-market assets and cryptocurrencies. A higher Bank of Japan policy rate would raise yen funding costs and could strengthen the yen, forcing leveraged investors to sell overseas assets, convert proceeds back into yen and repay loans. OdailyDepth pointed to the August 2024 flash crash as a reference case: a rapid rise in the yen triggered a short-term global equity sell-off, while Bitcoin fell nearly $20,000 in one day, with a maximum decline of 15%.
From negative rates to a possible 1.0% policy rate
Hawkish voices inside the Bank of Japan have grown stronger over the past two years. In March 2024, the BOJ ended its 17-year negative-rate policy and lifted the policy rate from -0.1% to a range of 0% to 0.1%, marking the first rate hike of the current cycle. In July 2024, the central bank raised rates again by 15bp to 0.25% and announced a gradual reduction of its balance sheet. In January and December 2025, it raised rates by 25bp each time, taking the policy rate to 0.75%. The first three meetings of 2026 left rates unchanged.
OdailyDepth identified two main reasons for the renewed pressure to raise rates. The first is the energy shock and imported inflation. Oil-price volatility caused by conflict in the Middle East has increased import costs for Japan, a country highly dependent on imported energy. Japan’s corporate goods price index rose 6.3% year on year in May, the fastest pace since 2023. Petroleum products rose 9.6%, while utilities increased 8.5%. The BOJ expects core CPI in fiscal year 2026 to rise to 2.5%-3.0%, above its stated 2% target.
The second factor is yen weakness. USD/JPY has remained near the 158-160 range, close to an historically extreme weak-yen zone. The depreciation has reduced the import purchasing power of Japanese companies and pushed up the cost of energy, raw materials and other commodities, feeding into domestic prices. Japan’s Ministry of Finance has intervened in the foreign-exchange market several times, but OdailyDepth noted that the effect has been limited and difficult to sustain. BOJ Governor Kazuo Ueda also shifted clearly toward an anti-inflation narrative in a June 3 speech, saying that if upside risks to prices outweigh downside risks to the economy, the benefits and drawbacks of rate hikes must be discussed.
The carry-trade unwind and its feedback loop
Reuters, citing three people familiar with the matter, reported that unless the conflict in the Middle East escalates sharply, the BOJ will raise rates in June and may slow the pace of bond balance-sheet reduction to maintain market stability. Bloomberg and ING have maintained similar views and expect the BOJ to raise rates by a total of 50bp in 2026. OdailyDepth described this as a shift by Japan from the role of a “global lender of last resort” toward a normalized central bank, directly challenging global assets that rely on cheap yen funding.
The transmission chain is straightforward: yen appreciation increases foreign-exchange losses; higher funding costs force investors to deleverage; deleveraging leads to large-scale selling of risk assets; falling asset prices trigger more stop-loss orders; and liquidation pressure intensifies. A similar chain was visible on July 31, 2024, when the BOJ raised rates by 15bp to 0.25% and announced gradual balance-sheet reduction, while weak U.S. employment data added pressure. South Korea’s KOSPI and KOSDAQ both plunged and triggered circuit breakers. Japan’s Nikkei 225 fell 12.4% in a single session and lost more than 20% in one week, its worst performance since 1987. U.S. equities and technology shares also corrected, the VIX fear index surged, and Bitcoin and ETH fell by more than 30% within a week as leveraged liquidations jumped.
According to Morgan Stanley, although many positions have been unwound gradually since 2024, around $500 billion in open yen-funded positions still remain in the market. The bank warned that a rapid yen appreciation could trigger chain liquidations during periods of thin liquidity, with the most severe impact on highly leveraged assets. J.P. Morgan global market strategist Dubravko Lakos-Bujas and foreign-exchange strategist Meera Chandan also said the policy divergence between the BOJ and the Federal Reserve will increase instability in the carry-trade unwind and could lead to a revaluation of global risk assets.
AI technology shares face the first valuation test
The AI-driven technology rally has been the main theme for U.S. stocks in the first half of 2026, with chipmakers such as Nvidia and Broadcom, along with hyperscale cloud-service providers, pushing the Nasdaq to repeated highs. But in June, rotation and correction became more visible. On June 5, U.S. stocks recorded their sharpest single-day pullback so far in 2026: the Nasdaq fell 4.18%, its largest one-day decline since April 2025; the S&P 500 dropped 2.64%, ending nine consecutive weeks of gains; the Dow fell 1.35%; and the Philadelphia Semiconductor Index plunged more than 10%, with Nvidia, Broadcom, Micron and Marvell leading losses among core AI names.
The pullback reflected geopolitical tensions and uncertainty around Federal Reserve policy, but OdailyDepth also identified the BOJ rate-hike risk as part of the pressure. Tighter liquidity directly hurts high-valuation growth stocks. AI companies have large capital-expenditure needs and rely heavily on cheap financing. If yen carry trades are unwound, global risk-appetite flows decline, putting high-beta technology shares under pressure first. Nvidia, Broadcom and other semiconductor leaders, as well as hyperscalers such as Meta and Microsoft, are highly sensitive to valuation shifts. Investing.com noted that high-valuation growth sectors are the most sensitive to changes in global liquidity and often experience rapid deleveraging once carry-trade unwinding begins.
Bitcoin and crypto enter the same liquidity channel
Energy costs also put pressure on AI margins. The conflict in the Middle East has pushed up oil prices, increasing electricity and cooling costs for data centers. Combined with BOJ rate hikes, this creates what OdailyDepth described as a stagflation-style macro environment that tests the sustainability of AI business models. BitMex founder Arthur Hayes warned in his latest article, “Reality Test,” that “energy reality is testing the market’s current ‘dreaming’ state.” Higher oil prices raise operating costs and may slow growth in enterprise token usage, further weighing on AI-related revenue expectations. At the same time, SpaceX, Anthropic and OpenAI are planning intensive listings in the second half of 2026, with valuations often reaching hundreds of times sales. Lock-up expirations would bring substantial supply pressure. Trump’s possible shift against AI ahead of the midterm elections also adds regulatory uncertainty.
Cryptocurrencies, as some of the highest-beta risk assets globally, sit inside the same pressure chain. On one side, Japanese rate hikes raise financing costs and global leveraged trading costs, forcing large-scale unwinding of crypto leverage. On the other side, AI capital expenditure has already absorbed a large amount of market funding, leaving crypto behind in the competition for liquidity. A BOJ move would further tighten marginal liquidity. Yahoo Finance analyst Lockridge Okoth said a rate-hike probability of 98% could trigger Bitcoin’s next liquidity shock. Investing.com also noted that yen appreciation and BTC weakness are often highly synchronized and are a typical signal of rising global risk aversion.
OdailyDepth concluded that renewed concern over BOJ rate hikes is not an isolated event, but a signal of marginal tightening in global liquidity. The combination of Middle East geopolitical conflict pushing up oil prices, AI capital expenditure consuming liquidity, and uncertainty around Federal Reserve policy is reducing the buffer for risk assets. For investors, global risk assets, especially high-leverage and high-valuation sectors such as AI technology shares and cryptocurrencies, face clear short-term correction pressure and higher volatility, making leverage risk a central issue.