The Bank of Japan is widely expected to raise its policy rate by 25 bps at the June meeting, continuing its gradual exit from ultra-loose monetary policy. The key variable is not the hike itself — which appears largely priced — but the tone of the accompanying statement and Ueda's press conference, particularly any shift in language around the pace of future hikes or balance-sheet reduction.

A hawkish surprise could drive USD/JPY meaningfully lower as carry trades unwind, putting pressure on risk assets that benefited from cheap yen funding. Conversely, a hike with a cautious or data-dependent tone could see the yen give back gains quickly. Watchers should track USD/JPY, JGB yields, and Nikkei futures as the most direct read-throughs.