Bank of Japan rate-hike pressure grows as oil shock puts Bitcoin at risk

Bank of Japan board members called for swift interest rate hikes if inflation risks from the Iran war and energy shock persist, raising pressure on Japan’s crypto market.

Minutes from the BOJ’s March meeting, released May 7, showed many board members supporting hikes if elevated oil prices continued to feed broader inflation.

One member said the BOJ should raise rates “without long intervals.” Another argued for tightening “without hesitation” if the economy avoided major damage from the conflict.

The April Summary of Opinions, released May 11, reinforced that tone. One member said the central bank should “act decisively” on further rate increases if price pressures intensify.

At its April 27-28 meeting, the BOJ kept its policy rate at 0.75% on a 6-3 vote, with board members Hajime Takata, Naoki Tamura, and Junko Nakagawa pushing for an immediate hike to 1.0%.

Why Japan rates are a Bitcoin risk

As Cryptopolitan reported in January, Governor Kazuo Ueda has signaled a willingness to keep raising rates as economic activity and inflation strengthen.

Every BOJ rate hike since 2024 has triggered sharp Bitcoin selloffs. The July 31, 2024, hike to 0.25% caused the yen to appreciate from 160 to below 140 against the dollar, with Bitcoin falling from $65,000 to $50,000 within a week, a 23% decline.

The January 2025 hike to 0.50% drove a 25% to 31% Bitcoin drop over 20 days. Each move unwound yen carry trade positions and forced liquidations across leveraged crypto holdings.

Barclays Fixed Income, Forex, and Commodities Research and overnight index swap markets are pricing a 74% probability of a BOJ rate hike at the June meeting.

Oil and yen weakness raise BOJ pressure

The BOJ sharply raised its FY2026 inflation forecast to 2.8% from 1.9%, citing elevated oil prices from the Iran conflict and continued yen weakness.

The growth forecast was lowered to 0.5% from 1.0%. The BOJ projects core inflation near 3% for two consecutive years if oil prices and yen weakness persist.

The BOJ might unintentionally fall behind the curve” against inflation risks as the impact of yen depreciation becomes more pronounced.

– BOJ Board Member

Japan intervened in currency markets in early May to support the yen against the dollar. Analysts remain divided on whether the move can produce lasting effects, given strong structural demand for dollars to purchase oil.

June meeting could reset crypto risk

The BOJ’s June meeting is the clearest catalyst. With swap markets pricing a hike at 74% probability, any confirmation from officials could accelerate yen strengthening and pressure crypto pairs traded against the yen.

The Iran conflict remains the primary driver of the energy shock feeding into BOJ rate calculations.

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