Surge in Yen and Soaring Government Bond Yields May Threaten Bitcoin as Bank of Japan Considers Policy Shift
As the yen strengthens, the Bank of Japan may adjust its policy direction, with tightening measures potentially impacting cryptocurrency returns. The significant rise in the yen, coupled with Japanese government bond yields reaching a 30-year high, is sending warning signals to global markets, and Bitcoin may not be spared.
This week, Japan's 30-year government bond yield jumped to 2.345%, the highest level since 1994, while the yen-to-dollar exchange rate rose to around 153 yen per dollar.
A Goldman Sachs analyst team led by Akira Otani, the former chief economist of the Bank of Japan, believes that the central bank may be on the verge of a policy tightening amid the continued yen appreciation.
Goldman Sachs noted in a Monday report that if the yen further appreciates to 130 yen per dollar, the central bank might pause rate hikes and lower its 2026 inflation forecast; conversely, if the yen depreciates beyond 160, it may be forced to adopt a more restrictive policy.
Regardless of the scenario, global markets are watching closely, and cryptocurrencies may be among the first to feel the pressure.
A "Major Turning Point" for Risk Assets
Bitcoin, which has thrived in an environment of excess liquidity, now faces the risk of capital rotation triggered by rising Japanese yields. Increased fixed-income returns and policy tightening typically lead to institutional funds withdrawing from speculative assets, especially those like Bitcoin that heavily depend on a liquid environment.
Agne Linge, Growth Lead at decentralized bank WeFi, told Decrypt: "The surge in 30-year bond yields signals a shift in Japan's macroeconomic trends, which will be a major turning point for risk assets."
Beyond capital rotation, Linge warns of deeper structural impacts: "When investors can borrow yen at lower rates, carry trades flourish... As bond yields soar, the demand for borrowing yen to invest in other assets will be constrained."
Other analysts suggest that if Japan further tightens its policy, Bitcoin's recent stable trend around $85,600 may not hold. Aravanan Pandian, founder and CEO of crypto exchange KoinBX, told Decrypt that the Bank of Japan's long-term accommodative policy has been a key pillar of global risk appetite, but this may be changing.
"If the Bank of Japan terminates or significantly tightens its yield curve control (YCC), it could lead to massive capital outflows, especially from crypto assets," he analyzed. "Historical data shows that yen appreciation often signals rising risk aversion, which reduces speculative positions in portfolios."
Yield curve control (YCC) is a policy tool where the central bank controls long-term interest rates by buying and selling government bonds. Pandian added that the impact of Japan's policy shift goes beyond cryptocurrencies and may "trigger a broad reassessment of central bank autonomy and global debt sustainability."
Not Everyone is Bearish on Digital Assets
With CPI and PPI growth slowing, the Federal Reserve is facing increasing pressure to cut rates, which could offset Japan's hawkish tendencies. Marcin Kazmierczak, co-founder of modular oracle RedStone, citing the Bank of Japan's last policy shift in 2016, noted: "Bitcoin initially dropped 15% but strongly rebounded within six months."
Temporary Volatility?
While Goldman Sachs warns that yen appreciation might cause capital flight from digital assets, Kazmierczak believes the current crypto market is more resilient than previous cycles. "Bitcoin's 21 million supply cap gives it a unique advantage during monetary policy changes," he suggests, implying the current downturn might be a "temporary adjustment rather than a structural shift".
While focusing on Japanese policy developments, U.S. economic signals are also influencing market sentiment. Bitcoin slightly rose on Monday as investors digest rising inflation expectations and recession risks. A Federal Reserve survey shows consumers expect inflation at 3.6% in the coming year, with 44% anticipating increased unemployment, pushing the anxiety index to a new high since April 2020.
According to CoinGecko data, Bitcoin is currently trading at $85,210, up 0.6% in 24 hours and 8.2% for the week. The decentralized prediction platform MYRIAD, operated by Decrypt's parent company DASTAN, shows that 55% of predictors believe Bitcoin will maintain the $85,000 level before Wednesday.
