Yen Carry Trade Risk Edges Toward Bitcoin as Investors Underprice Japan’s Bond Market Shock

Japan's bond market is experiencing a dramatic repricing, with the 10-year JGB yield hitting its highest since 1999 and the 30-year yield reaching a record high, driven by concerns over massive fiscal spending and the Bank of Japan (BoJ) potentially falling behind inflation. This tightening dynamic, coupled with a reported 4.9% drop in cash in circulation, threatens the global yen carry trade, where investors borrow cheaply in yen to fund riskier assets like Bitcoin. Analysts warn this could lead to forced unwinds, posing a slow-burning risk to crypto markets, described by some as a "boiling frog syndrome." However, the outlook is complicated because Japan's real interest rates remain negative, which continues to support liquidity and keeps Japanese equities near all-time highs, suggesting the risk is a gradual erosion of global liquidity rather than an immediate shock.

(Source：BeInCrypto)