A strengthening yen combined with the highest Japanese bond yields seen in three decades is raising alarms in global markets, and Bitcoin could be affected.
This week, Japan’s 30-year bond yield climbed to 2.345%, marking its highest point since 1994, while the yen increased to approximately 153 against the U.S. dollar.
Goldman Sachs analysts, including former Bank of Japan (BOJ) chief economist Akira Otani, suggest that the central bank may be approaching a policy shift due to the yen’s surge.
Should the yen continue to strengthen towards 130/USD, the BOJ might halt rate hikes and lower its inflation projections for 2026. Conversely, a weaker yen below 160 could necessitate stricter policies, the analysts noted in a report on Monday.
“Significant Shift” for Risk Assets
Bitcoin, which benefits from high liquidity, may face challenges as Japanese yields rise.
Increased fixed-income returns and tighter policies generally lead institutional investors to move away from speculative assets, particularly those like Bitcoin that depend heavily on favorable liquidity conditions.
Agne Linge, Head of Growth at decentralized bank WeFi, emphasized that the current spike in Japan’s 30-year bond yield indicates a significant change for risk assets.
Linge also highlighted a potential long-term impact: “The yen carry trade thrives when investors borrow yen at lower rates… As bond yields rise, the incentive to convert yen for investment in other assets diminishes.
Some analysts express skepticism regarding Bitcoin’s recent stability at around $85,600 if Japan imposes further tightening. According to Aravanan Pandian, CEO and Founder of crypto exchange KoinBX, the BOJ’s historically lenient policies have been vital to global risk appetite, which may soon shift.
Pandian added that tightening yield curve control (YCC) by the BOJ could result in a considerable capital repatriation from crypto assets, as a stronger yen typically indicates a risk-off sentiment that reduces speculative investment.
A Temporary Setback?
While Goldman Sachs analysts have raised concerns about a stronger yen causing capital outflow from digital assets, Kazmierczak believes the crypto market is more resilient than in previous cycles.
Kazmierczak noted that Bitcoin’s fixed supply of 21 million coins makes it uniquely positioned amidst evolving monetary policies, implying that the current downturn might be a short-lived phenomenon.
While Japan’s policy direction remains under scrutiny, U.S. economic indicators are also influencing market sentiment. Bitcoin saw a rise recently as investors reacted to increasing inflation expectations and recession concerns.
Currently, Bitcoin is trading at approximately $85,210, reflecting a 0.6% increase over the past 24 hours and an 8.2% rise over the past week, according to data from CoinGecko.
