Sanae Takaichi accepts the Bank of Japan's interest rate hike, implying that a further rate increase in September is now on the agenda.

Japanese Prime Minister Sanae Takaichi publicly accepted the Bank of Japan's decision to raise interest rates to 1% in June, indicating that a further rate hike in September has entered the policy agenda.
(Background: The Bank of Japan maintained interest rates at 0.75%, as expected, while Middle Eastern conflicts pushing up oil prices have become a new variable for rate hikes.)
(Additional context: The super-central bank week is coming! Fed Chair Powell's first speech, the Bank of Japan is expected to raise rates to 1%, and the US-Iran peace agreement was signed on June 19.)

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• Bank of Japan raises rates to 1% in June, a 31-year high
• Sanae Takaichi’s “dovish” background
• Additional budget and inflation dual pressures
• Potential impacts on crypto and forex markets

Japanese Prime Minister Sanae Takaichi publicly stated on Monday (June 22) that she accepts the Bank of Japan’s rate hike decision last week and reaffirmed that the government and central bank will maintain coordinated cooperation to pave the way for further rate hikes in the second half of the year.

Bank of Japan raises rates to 1% in June, a 31-year high

On June 16, the Bank of Japan announced a 25 basis point increase in its policy rate to 1%, the highest level since 1995. The central bank’s monetary policy meeting minutes indicated that Japan’s economy is in a “synchronous expansion of income and expenditure,” with inflation expectations stabilized around the 2% target.

Reuters reported that the BOJ explicitly stated in its statement that “further adjustments will continue if necessary,” strongly implying there is room for more rate hikes within this year. The market widely expects September to be the next window for a rate increase.

Sanae Takaichi’s “dovish” background

Takaichi is known for her support of loose monetary policy. In March this year, she publicly advised BOJ Governor Ueda Kazuo “not to raise rates,” at a time when the yen was weakening and exporters faced currency pressure.

Her acceptance of the rate hike indicates that her government has recognized changes in inflation dynamics. Data released last week showed Japan’s nationwide consumer price index (CPI) in May increased by 1.4% year-over-year. Although government subsidies have lowered energy costs, the BOJ estimates that rising energy prices driven by Middle Eastern conflicts will still pose significant inflationary pressures.

Additional budget and inflation dual pressures

Takaichi’s government recently allocated an additional budget to mitigate the impact of Middle Eastern conflicts on household expenses in the coming months. This adds subtle policy tension—on one hand, subsidizing households to lower costs; on the other, signaling that inflation may rebound.

Economist expectations for the BOJ to hike rates again within the year have risen sharply. CME data shows that the probability of a rate hike in September has exceeded 60%. If the rate hike occurs as expected, the policy rate could reach 1.25%, further narrowing the Japan-U.S. interest rate differential.

Potential impacts on crypto and forex markets

The BOJ’s rate hike is gradually impacting crypto and forex markets. The yen carry trade unwinding was one of the factors behind Bitcoin’s sharp drop from $70k to $58k earlier this year. If rates are raised again in September, it could trigger another wave of unwinding, adding to global liquidity tightening pressures.

Meanwhile, domestic ETF capital flows in Japan are also worth monitoring. If Japanese bond yields continue to rise, institutional funds may shift from risk assets back into Japanese bonds, indirectly affecting liquidity conditions in the global crypto market.