Original | Odaily Planet Daily (@OdailyChina)
Author | Qin Xiaofeng (@QinXiaofeng 888 )
According to Nikkei News, the Bank of Japan (BoJ) is expected to raise its short-term policy rate from 0.75% to 1.0% during the monetary policy meeting on June 15-16, which would be the highest policy rate level since 1995. Currently, market pricing for a rate hike is extremely high, with the probability of a "25bp (basis point) hike" on PolyMarket surging from 25% in early April to 98%.
With a BoJ rate hike imminent, a large number of investors engaged in yen carry trades may be forced to sell overseas assets, convert back to yen, and repay loans, triggering a chain reaction and amplifying volatility in global risk assets—the flash crash in August 2024 serves as a classic example, where a sharp yen appreciation led to a short-term plunge in global stock markets, with Bitcoin plummeting nearly $20,000 in a single day, a maximum drop of 15%.
Odaily Planet Daily will analyze the macro backdrop and transmission mechanism of the BoJ rate hike, and focus on assessing the risk impact on AI tech stocks and cryptocurrencies for readers' reference.
1. Inflation Risks Drive BoJ Rate Hike
Over the past two years, hawkish voices within the BoJ have grown increasingly strong, culminating in the end of a 17-year negative interest rate policy in March 2024, raising the policy rate from -0.1% to a range of 0% to 0.1%, marking the first rate hike in this cycle. In July 2024, the BoJ hiked rates again by 15bp to 0.25% and announced a gradual balance sheet reduction; in January and December 2025, it raised rates by 25bp each, bringing the rate to 0.75%; rates remained unchanged in the first three meetings of 2026. The following outlines the BoJ's rate hikes in several meetings:
After keeping rates unchanged for half a year, why is the BoJ now eager to embark on a new round of rate hikes? This hike primarily stems from two aspects.
First, energy shocks and imported inflation pressure. As oil price volatility occurred due to Middle East conflicts in the first half of the year, Japan, highly dependent on imported energy, saw a significant rise in import costs. The Corporate Goods Price Index (CGPI) rose 6.3% year-on-year in May, the fastest pace since 2023, with petroleum products up 9.6% and utilities up 8.5%. The BoJ expects core CPI for fiscal 2026 to rise to 2.5-3.0%, far above the established 2% target.
Second, a weak yen exacerbates imported inflation. The current USD/JPY exchange rate continues to hover around the 158-160 high, nearing historically extreme weakness. The sharp depreciation of the yen directly weakens the import purchasing power of Japanese companies, leading to a significant increase in import costs for commodities such as energy and raw materials, further pushing up domestic prices. Although Japan's Ministry of Finance has repeatedly intervened in the foreign exchange market, the effects have been limited and unsustainable. This situation is forcing the BoJ to tighten monetary policy (i.e., raise rates) at the June meeting to avoid runaway inflation expectations.
In a speech on June 3, BoJ Governor Kazuo Ueda explicitly shifted the narrative towards fighting inflation, emphasizing that if upside risks to prices outweigh downside risks to the economy, the pros and cons of a rate hike must be discussed.
Reuters, citing three informed sources, reported that unless the Middle East conflict escalates sharply, the BoJ will raise rates in June and may slow the pace of bond portfolio reduction to maintain market stability. Bloomberg and institutions like ING maintain similar judgments and expect the BoJ to hike a total of 50bp in 2026.
This series of changes marks Japan's shift from the "world's last lender" to a normalizing central bank, posing a direct challenge to global assets reliant on cheap yen financing.
2. Unwinding Yen Carry Trades, Sustained Liquidity Tightening
The Bank of Japan's prolonged maintenance of ultra-loose monetary policy has made yen carry trades a key component of global liquidity over the past decade. Investors borrow yen at near-zero interest rates and invest in high-yielding assets like US stocks, tech stocks, emerging markets, and cryptocurrencies to earn interest differentials and capital gains.
The BoJ's upcoming rate hike will directly increase yen financing costs and could trigger yen appreciation (USD/JPY decline), forcing leveraged investors to unwind positions, creating a positive feedback loop: yen appreciation leads to expanding exchange rate losses → rising financing costs → forced investor deleveraging → large-scale selling of risk assets → further decline in asset prices → triggering more stop-losses → intensifying unwinding pressure.
Historically, every BoJ policy tightening signal has triggered severe market volatility.
On July 31, 2024, the BoJ hiked rates by 15bp to 0.25% and announced gradual balance sheet reduction, coupled with weak US employment data, triggering severe global market turbulence. At that time, South Korea's two major stock indices (KOSPI and KOSDAQ) plunged simultaneously, triggering circuit breakers; Japanese stocks crashed, with the Nikkei 225 plummeting 12.4% in a single day, accumulating a weekly loss of over 20%, the worst performance since 1987; global stock markets fell in tandem, with US stocks and tech stocks adjusting synchronously, and the VIX fear index soaring. Crypto also suffered heavy losses, with Bitcoin and ETH plunging over 30% in just a week, and leveraged liquidations surging.
According to Morgan Stanley estimates, although a significant number of positions have been gradually unwound since 2024, there are still approximately $500 billion in outstanding yen-funded positions in the market. Although the market has priced in some risks in advance, these positions still pose a significant hidden danger. Morgan Stanley warns that a rapid yen appreciation could trigger chain unwinding during periods of thin liquidity, especially impacting high-leverage assets severely.
J.P. Morgan's Global Head of Market Strategy, Dubravko Lakos-Bujas, and FX strategist Meera Chandan both pointed out that the policy divergence between the BoJ and the Federal Reserve will increase the instability of carry trade unwinding, potentially leading to a valuation reassessment of global risk assets.
3. Global Risk Assets Take a Hit, US Stocks and Crypto Not Spared
The AI-driven tech frenzy was the main theme for US stocks in the first half of 2026, with chip stocks like Nvidia and Broadcom and hyperscale cloud service providers leading the Nasdaq to repeatedly hit new highs.
However, entering June, significant rotation and pullbacks emerged in the market, particularly on June 5, when US stocks experienced their most severe single-day pullback of 2026 so far. The Nasdaq plunged 4.18%, marking its largest single-day drop since April 2025; the S&P 500 fell 2.64%, ending a nine-week winning streak; the Dow fell 1.35%, the Philadelphia Semiconductor Index plummeted over 10%, with core AI stocks like Nvidia, Broadcom, Micron, and Marvell leading the declines. (Recommended reading: "Nasdaq Drops 4.2% in a Day, Did 'Black Friday' Puncture the US Stock Bubble?")
The US stock market pullback is due to macro factors like geopolitical tensions and Fed policy uncertainty, but an undeniable factor is also the potential impact of the BoJ's impending rate hike.
First, liquidity tightening will directly hit high-valuation growth stocks. AI companies have massive capital expenditure scales and are highly dependent on cheap financing. Unwinding yen carry trades will reduce inflows of global risk-seeking capital, with high-beta tech stocks bearing the brunt. Semiconductor leaders like Nvidia and Broadcom, as well as hyperscalers like Meta and Microsoft, have extremely high valuation sensitivity and are highly susceptible to selling. Investing.com analysis points out that high-valuation growth sectors are most sensitive to changes in global liquidity; once carry trade unwinding begins, rapid deleveraging often occurs.
Second, rising energy costs will significantly compress AI profit margins. Middle East conflicts pushing up oil prices lead to a sharp increase in data center power and cooling costs, forming a "stagflationary" macro environment alongside BoJ rate hikes, severely testing the sustainability of the AI business model.
BitMex founder Arthur Hayes explicitly warned in his latest article "Reality Test": "The energy reality is testing the market's current 'dreaming' state." High oil prices not only raise operating costs but may also slow the growth of corporate token usage, further dampening AI-related revenue expectations.
Lastly, mega IPO supply shocks and political regulatory risks. Giants like SpaceX, Anthropic, and OpenAI plan to list intensively in the second half of 2026, with valuations often at hundreds of times sales; lock-up expirations will bring massive supply pressure. Meanwhile, Trump may shift to an anti-AI stance for midterm elections, increasing regulatory uncertainty.
As the highest-beta global risk asset, cryptocurrencies are even more precarious. On one hand, the BoJ rate hike brings rising global financing costs, directly increasing the cost of leveraged crypto trading, forcing large-scale liquidation of crypto leveraged positions; on the other hand, in competing for liquidity with AI, AI capital expenditure has already absorbed substantial market funds, leaving crypto lagging behind, and BoJ action will further tighten marginal liquidity.
Yahoo Finance analyst Lockridge Okoth stated that the 98% probability of a rate hike could trigger the next liquidity shock for Bitcoin. Investing.com analysis points out that yen appreciation and BTC weakness often move in high synchrony, a typical signal of rising global risk aversion.
Arthur Hayes has also emphasized in multiple analyses that the dynamics of yen carry trades remain one of the key variables affecting Bitcoin liquidity, reminding investors to pay attention to short-term liquidity shocks triggered by policy signals. In recent articles, Arthur Hayes emphasized the need to be wary of the combined impact of short-term energy costs and monetary policy risks; BTC/ETH may adjust alongside risk assets in the short term, with the long-term outlook depending on liquidity restarting.
Conclusion:
The rekindled concerns over a BoJ rate hike are not an isolated event but a signal of marginal tightening in global liquidity. Particularly with the current Middle East geopolitical conflict pushing oil prices higher, AI capital expenditure consuming liquidity, and multiple factors like Fed policy uncertainty superimposed, the buffer space is further compressed.
For investors, global risk assets—especially high-leverage, high-valuation sectors (AI tech stocks and cryptocurrencies)—may face significant downward pressure in the short term, with volatility set to rise noticeably. It is crucial to remain highly vigilant and mindful of leverage risks.
