Bank of Japan’s Ueda warns oil shock could complicate inflation outlook, with ripple effects for Bitcoin

Bank of Japan Governor Kazuo Ueda just reminded everyone that oil prices remain one of the most unpredictable forces in global economics. During the BOJ’s April 28 policy meeting, Ueda flagged the risk that surging crude prices, driven by escalating Middle East tensions, could simultaneously drag on economic growth and push inflation higher.

What the BOJ actually did

The central bank kept its benchmark interest rate at roughly 0.75% for the third consecutive meeting. The BOJ also lifted its FY2026 core inflation forecast to 2.8%, a meaningful jump largely attributed to oil price volatility.

Ueda warned that higher crude prices could encourage companies to pass costs along to consumers more aggressively. When businesses start raising prices because their input costs are climbing, and consumers start expecting those higher prices to stick, you get what economists call second-round inflation effects. That’s the scenario the BOJ is now watching closely.

The June decision looms large

The BOJ’s next policy meeting is expected in June 2026, and Ueda left the door open to a rate hike if evidence of those second-round effects materializes. He emphasized a data-dependent approach.

Japan’s economy has historically been one of the most energy-import-dependent among major developed nations, with over 90% of its Middle East oil imports transiting through the Strait of Hormuz. When crude prices spike, Japan feels it faster and deeper than most peers.

Why crypto traders should pay attention

A CoinDesk analysis highlighted that the BOJ’s cautious approach to rate hikes could provide ongoing support for risk assets, including Bitcoin. The mechanism is the yen carry trade: investors borrow in Japanese yen at low interest rates, then deploy that capital into higher-yielding assets elsewhere. When Japanese rates stay low, the trade remains attractive. When rates rise, the trade unwinds, and capital flows back. The last time carry trade unwinding fears gripped markets, in mid-2024, it sent shockwaves through both traditional and crypto markets.

By holding at 0.75% and signaling caution, the BOJ is effectively keeping the carry trade alive. If the BOJ pivots to a rate hike in June, higher Japanese rates would narrow the interest rate differential that makes the carry trade profitable, potentially creating pressure to unwind positions in risk assets like Bitcoin.

The key variable to watch is oil. If Middle Eastern tensions escalate further and crude prices continue climbing, the BOJ may be forced into action regardless of its preference for patience. Conversely, if oil prices stabilize or retreat, the BOJ gets breathing room to maintain its current stance, preserving the conditions that have supported the carry trade.

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