A weakening yen, rising bond yields, and the risk of a carry trade unwind pose a headwind to risk assets, including bitcoin.
A weakening yen, rising bond yields, and the risk of a carry trade unwind pose a headwind to risk assets, including bitcoin.The yen’s sustained weakness near 160 against the U.S. dollar is increasing pressure on the Bank of Japan to raise rates further.
Japanese government bond yields, with the 40 year yield above 4%, signal tightening conditions, and past episodes show higher Japanese rates can trigger sharp crypto sell offs. Prospects of interest rate rises are no longer just the U.S. story. Traders are now betting the Bank of Japan could tighten too as the resource-scarce nation faces inflation risks from the ongoing Iran war. Traders see a roughly 69% chance of the BoJ raising its benchmark borrowing cost at the April 28 meeting, according to data tracked by Bloomberg. Action in options tied to U.S. interest rates shows traders expect the Fed to raise borrowing costs in the coming weeks. BoJ's policy meeting summary released Monday showed one member calling for a bigger rate hike in response to the conflict in the Middle East and its inflationary impact on Japanese society. Comments also noted that any move would factor in incoming economic data and anecdotal signals from the market. The Fed’s tightening is a well-known headwind for risk assets, including bitcoin. The Bank of Japan can be just as impactful. Years of ultra-low rates encouraged traders to borrow in yen and invest in higher-yielding markets , keeping borrowing costs suppressed globally and greasing rallies in risk assets. So, a shift toward tighter policy in Tokyo could reverse these flows, sending ripples across markets and potentially deepening the crypto bear market. The BoJ has already raised its interest rate to 0.75% from -0.1% over the past two years while simultaneously ending its massive asset purchase program. Yet, rates in Japan remain significantly lower than the 3.5% seen in the U.S. The bank, therefore, has plenty of room to hike if the Iran crisis worsens, potentially driving higher energy prices and imported inflation in Japan and other oil-dependent countries.Hiking rates, however, will be a challenging task given Japan’s strained fiscal situation. The country’s debt-to-GDP ratio stands at a staggering 240%, meaning higher rates could sharply increase borrowing costs and strain government finances.Japan is caught between a rock and a hard place. If it hikes rates and allows government bond yields to rise, it could put Japan’s debt sustainability at risk. If it keeps rates low, the yen will likely depreciate significantly, adding to inflation concerns. Strains are already evident in the FX market. The Japanese yen continues to weaken and is currently just around 160 per U.S. dollar, its weakest level since mid-2024. The JPY has depreciated by 54% since 2021.As stablecoins evolve into core financial infrastructure, North America leads. This report maps the regulation, market shifts, and players driving adoption.Stablecoins are entering their third phase of evolution - the institutionalization era - becoming increasingly embedded into core financial infrastructure. As institutions prioritize transparency and compliance, regulated issuers like USDC, RLUSD, and PYUSD are steadily gaining share with RLUSD surpassing $1B in market cap within its first year. North America, leading in regulatory frameworks and institutional distribution, is at the center of it all. Bitcoin rises as Trump says U.S. in talks with 'new regime' in Iran, threatens oil infrastructure if deal fails Trump said "great progress" had been made toward ending the war, but warned the U.S. would "obliterate" Iran's power plants, oil wells and Kharg Island if a deal isn't reached shortly.President Donald Trump the U.S. is in "serious discussions" with a "new, and more reasonable, regime" in Iran to end military operations, signaling a possible change of government in Tehran. In a post on Truth Social, Trump also demanded the Strait of Hormuz be "immediately" reopened and threatened to destroy...Bitcoin rises as Trump says U.S. in talks with 'new regime' in Iran, threatens oil infrastructure if deal fails
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