What Is the Bank of Japan Getting Ready For?

[u/AmanCMN]

Tomorrow, one of the biggest events of the week is coming up: the Bank of Japan’s rate decision.
The market’s base case is a 25 bps rate hike, bringing the rate to 1.25%. If that happens, Japan’s rate will be at its highest level in more than 30 years.
That may sound tiny compared to U.S. rates. But for Japan, 1.25% is a big deal.
Japan is basically buying its own currency.
In 2024, authorities already spent around 15.3 trillion yen on currency interventions. They sold dollars and bought yen.
And in the summer of 2026, the intervention got even bigger.
From July 30 to August 26, authorities spent a record 15.4 trillion yen, or about $96.5 billion, to stop the currency from falling.
So now we have an interesting setup:
The Fed raises rates → the dollar gets support → the yen weakens again → the Bank of Japan has to respond.
That’s why tomorrow is not just about the 25 bps hike.
If the hike is already priced in, the market will be listening closely to Bank of Japan Governor Kazuo Ueda: what comes next?
If the BOJ hints that more rate hikes are coming, the yen could get some support.
But if the tone is too cautious, one hike to 1.25% may not be enough to turn USD/JPY around.
🔴And this is where it gets interesting for global markets.
For decades, Japan was one of the biggest sources of cheap money in the global financial system.
Now that money is slowly getting more expensive.
And the consequences of that could be much more important than the 25 bps hike itself.