Japan’s rate hike ends the ‘free money’ era and puts Bitcoin on notice

The Bank of Japan (BoJ) raised its benchmark rate to 0.75%, marking a significant shift away from its decades-long "ultra-accommodative" policy. This move directly impacts the yen carry trade, which has quietly financed leverage in global risk assets like Bitcoin by borrowing low-yielding yen to invest elsewhere. Analysts suggest that if the US Federal Reserve begins cutting rates while Japan continues to tighten, the shrinking interest-rate spread will erode the economic basis for this leverage, potentially causing capital repatriation and headwinds for risk assets.

Furthermore, the pressure point might be shifting from headline rates to hedging costs, particularly for Japanese life insurers. As US rates rose above 5%, the cost of hedging US Treasuries back into yen exploded, wiping out yield. With Japanese government bond yields now offering a workable return (above 2%), capital that previously sought hedged US assets may stay onshore, weakening the incremental bid for risk assets like Bitcoin.

Despite these macro shifts, Bitcoin has remained resilient, leading to a "macro stalemate" as US data suggests easing while Japan tightens. However, sophisticated US traders are already de-risking, evidenced by negative Coinbase Premium data. While some see this as a major regime break, others, like Arthur Hayes, argue the BoJ remains constrained, predicting negative real rates will persist, ultimately leading to a weaker yen and higher Bitcoin prices as investors seek inflation protection.

(Source：CryptoSlate)