There are two meetings this week. Both are simultaneously shaping the future of the market. And what's interesting is that one has to make a decision without knowing about the other.

First the BOJ. Then the FOMC. And this order is no coincidence, creating one of the most complex moments in global monetary policy.
Let's start with the BOJ.
The Bank of Japan today almost certainly decided to raise interest rates from the current 0.75 percent to 1 percent. The market is pricing in a probability of between 94 and 99 percent. A Reuters survey of 60 economists, almost all of whom expected a June increase, also means that the 1 percent level will be seen for the first time since 1995. Thirty-one years.
But this increase alone is not a surprise. The market knows this, expects it, and has largely priced it in. The real question is: What will the BOJ say after the increase?
The bank is under two conflicting pressures. On one hand, inflation. Japan's core inflation is running above target at 2.8 percent. The growth forecast has been revised downwards, from 1 percent to 0.5 percent. High inflation and slowing growth simultaneously. This combination is one of the most difficult scenarios for central bankers.
On the other hand, the yen. A yen weak against the dollar increases import costs and fuels inflation. An interest rate hike strengthens the yen, reducing import pressure. But a very rapid strengthening of the yen puts exporters in a difficult position and increases pressure on growth.
The BOJ is making a decision on this balance, but it doesn't know what it will do tomorrow. Because the Fed's decision has not yet been announced.
The order here is critical. The BOJ is deciding today. The Fed tomorrow. And this order directly affects the yen carry trade dynamics.
What is the yen carry trade and why is it important? For years, Japan lent at near-zero interest rates. Global investors borrowed cheap yen and invested in dollar-denominated assets. Stocks, bonds, crypto. This trade grew and grew. Now, as the BOJ raises interest rates, the yen is gaining value, the carry trade is closing, and this closing requires selling risk assets.
In August 2024, when the BOJ made an unexpected hike, Bitcoin fell by 23 percent in 48 hours. When the rate hike reached 0.50% in January 2025, there was a 25% to 31% loss. The same mechanism every time.
But this time there's something different. The Strait of Hormuz opened. Oil fell to $81. Energy-related inflationary pressure began to ease. This could pave the way for a combination where the BOJ raises interest rates but also softens its hawkish signal. Indeed, news that the BOJ is considering pausing its bond purchase reduction program is part of this balancing act.
If the BOJ raises rates but keeps its language moderate, the market will interpret this as less tightening than expected. In this scenario, the yen will strengthen, but in a controlled manner. Carry trade will be shaken but will not collapse.
Now I'm moving on to the FOMC.
Tomorrow the Fed announces its decision. This is Kevin Warsh's first meeting as Fed chairman. Jerome Powell left office on May 15. Warsh is known as a proponent of tight monetary policy.
Interest rates will remain unchanged, between 3.50% and 3.75%. There's almost no doubt about this in the market. But the decision to keep rates unchanged itself is secondary at this meeting.
There are two primary things.
The dot plot. This projection published by the Fed shows where each member expects interest rates to be in 2026, 2027, and the long term. The current median indicates a single cut for 2026. If this drops to zero, the market will instantly reprice it. If it goes up to two cuts, that's a bullish signal. Historically, the dot plot has moved the market far more than the interest rate decision itself.
Warsh's language. There's even debate about whether he'll remove the dot plot entirely at this meeting. If he does, that in itself is a signal of uncertainty. If he keeps it, every word of what the notes say will be analyzed.
Let's recall the macro context. At the April FOMC meeting, there was an 8-to-4 dissenting vote. The deepest division since 1992. There's real disagreement within the Fed. Some members think inflation is temporary, others think it's structural. This week reveals the first clues as to how this division will be resolved under Warsh's leadership. How does the Iran agreement fit into this equation? The drop in oil prices to $81 is reducing energy-related inflationary pressure. If this decline starts to appear in the June and July CPI data, the Fed's tone may change. Warsh was unaware of this development today because the agreement was signed yesterday. But from now on, the oil effect will begin to appear in every inflation data release.
How will crypto be affected by these two meetings?
Bitcoin fell in seven out of eight FOMC meetings throughout 2025. Even in meetings where interest rate cuts occurred. Why? Because expectation really comes first. The market expects a cut, prices rise, the meeting comes, it happens, and selling begins. This is called selling the news.
Currently, the expectation is for rates to remain unchanged. If there is no surprise, the short-term reaction may be limited. But if the dot plot surprises, meaning there are two signals of a rate cut, that's different. Or conversely, if there are zero signals of a rate cut, that's also different. Both extreme scenarios will move the market sharply.
I downsized my positions going into these two meetings. Holding large positions at the height of uncertainty is an unnecessary risk. The picture will become clearer after the decisions are announced. I will evaluate it once it's clear. The impact of these two decisions will be visible in the market tomorrow evening. If the BOJ strengthens the yen, carry trade will be shaken. If the Fed takes a hawkish stance, risk assets will be sold. If both happen simultaneously, the impact will be amplified. But I also know this: the Iran deal is over. Oil is falling. The global risk environment is cleaner than last week. Central bank decisions made against this backdrop are coming with much less pressure than the decisions made in the midst of the Hormuz crisis four months ago. The macroeconomic environment wasn't getting worse; it was just very bad. And now it's a little less bad. Sometimes that's enough for the market.

This content is for informational purposes only and does not constitute financial advice.

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