Bank of Japan Set to Hike to 1.25%, Highest Since 1995. Bitcoin Isn't Flinching Yet

The Bank of Japan (BOJ) meets Thursday and Friday and is widely expected to raise its policy rate to 1.25%, the highest level since April 1995. Japan's short-term bond yields have already gone vertical ahead of the decision.

Japanese government bonds, the yen, and Tokyo stocks are all repricing hard. Bitcoin (BTC) is not following, and that divergence faces its first real test this week.

Japan's Short End Went Vertical Ahead of the Rate Hike

Japan's six-month bill yield closed near 1.335% on Friday. Two years ago, the same maturity traded below zero.

The 2026 climb shows almost no pullback. That pattern suggests traders keep revising their view of where rates end up, faster than the central bank delivers.

A Reuters poll published Friday found 66 of 68 economists expect a hike this week. Almost 90% see 1.50% by the end of March. Reports last week also signaled a faster tightening pace, with another move possible in 2026.

This Is Fiscal, Not Inflation

The long end has moved just as far. The 10-year yield reached 3% this month for the first time since 1996, and the two-year sits near 1.85%.

Inflation does not explain it. July consumer prices rose 1.9% annually, with core at 1.8%, a seventh straight month below the 2% target.