Former Bank of Japan board member Makoto Sakurai told Bloomberg on May 29 that the June 15-16 rate meeting is 'very likely' to deliver a hike, warning that if the window is missed, uncertainty from the Iran conflict could postpone the next move indefinitely. The current policy rate stands at 0.75%, and overnight index swap (OIS) pricing shows traders pricing in a 25 basis point hike to 1.00% with a 77% to 80% probability. The April meeting's 6-3 vote—three members calling for an immediate hike—was a rare split that itself signaled strong momentum.
Tokyo inflation hits 4-year low, Sakurai calls it 'technical noise'
Tokyo's May core CPI (excluding fresh food) rose just 1.3% year-on-year, down from 1.5% in April and marking the smallest gain in four years. Headline CPI came in at 1.4%, and core-core CPI (excluding food and energy) slumped from 1.9% to 1.6%—all three metrics falling below the BOJ's 2% target. On the surface, cooling inflation undermines the case for a hike. But Sakurai attributed the slowdown to a temporary water fee cut by the Tokyo metropolitan government, a technical distortion that does not alter the BOJ's policy trajectory. Core inflation could re-accelerate later this year, he said. The yen is hovering near levels that prompted MoF intervention last month: over $30 billion was spent in late April and early May, temporarily pushing USD/JPY from 160 to 155, but nearly 80% of that effect has already been erased within three weeks. With the BOJ at 0.75% and the Fed at 3.50%-3.75%, a 300 bps rate differential continues to fuel carry trades, making each intervention a losing battle against structural spreads.
Bessent visits Japan, voices 'broad support' for rate hike
Prime Minister Sanae Takaichi, long seen as the biggest political obstacle to a hike, publicly backs loose policy. After meeting BOJ Governor Kazuo Ueda on May 22, Ueda merely said they 'did not discuss specific matters' — a signal that Nikkei interpreted as Takaichi possibly consenting to a June move. The key variable was U.S. Treasury Secretary Scott Bessent, who on May 12 met Takaichi, Finance Minister Satsuki Katayama, and Ueda during his 54th visit to Japan. Bessent told Reuters he had 'broad support' for the BOJ to raise rates further. Analysts say the green light from Washington effectively removed the last political hurdle for Takaichi.
Crypto market risk: carry trade unwind déjà vu
For crypto markets, a BOJ hike to 1.00% would once again raise the specter of a yen carry trade unwind. Last year, a BOJ rate increase triggered a global risk-asset rout, with Bitcoin shedding over 8% in a single day. The Fed's April PCE inflation reading hit 3.8%, keeping rate cuts far off, which means the only path to narrowing the U.S.-Japan rate gap is the BOJ hiking on its own. That liquidity impact cannot be ignored. Traders should brace for potential yen volatility around mid-June and possible spillover effects into cryptocurrencies.