Bank of Japan may raise interest rates twice by March, says ex-official

Japan’s central bank just raised interest rates to their highest level since 1995. And if a former insider is right, it’s not done yet.

Makoto Sakurai, a former Bank of Japan board member, said in a June 19 interview that the BOJ could hike rates two more times before the end of the fiscal year in March 2027. The potential timeline: once in October 2026, and again by March, contingent on a sharp acceleration in inflation.

From zero to one, fast

The context here matters. On June 16-17, the BOJ voted 7-1 to raise its benchmark short-term rate by 25 basis points, bringing it from 0.75% to 1%. That’s the highest the rate has been since September 1995.

This was only the second rate increase since December 2025. And it’s part of a broader shift that started in March 2024, when the BOJ finally began exiting its ultra-loose monetary policy after 17 years of near-zero rates.

One notable wrinkle from the June meeting: BOJ Governor Kazuo Ueda was unable to attend due to illness. He communicated his views in writing instead.

Why the urgency

The driving force behind this hawkish pivot is inflation, and specifically the kind that’s hard to ignore. The Iran conflict has amplified energy prices across Asia, and Japan, which imports the vast majority of its energy, is feeling the squeeze acutely.

Sakurai’s comments suggest that if inflation continues accelerating, the BOJ won’t hesitate to act more aggressively. Two additional hikes by March 2027 would bring the policy rate to roughly 1.5%.

What this means for investors

For years, the BOJ’s ultra-low rates made the yen a favorite funding currency for carry trades, where investors borrow cheaply in yen and park money in higher-yielding assets elsewhere. That includes risk assets like equities and, yes, crypto.

As the BOJ tightens, the yen strengthens. A stronger yen makes those carry trades less profitable and, in some cases, forces unwinding. We saw a preview of this dynamic in mid-2024 when a relatively modest BOJ rate adjustment triggered volatility across global markets, including a notable sell-off in Bitcoin.

Traders should be watching BOJ communications closely in the coming months, particularly any signals around the October meeting that Sakurai flagged as a potential inflection point.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.