Yen Surge, Soaring Bond Yields Could Threaten Bitcoin as BOJ Weighs Policy Shift

A rallying yen and the highest Japanese bond yields in 30 years are sending warning signals across global markets, and Bitcoin may not be spared.

This week, Japan’s 30-year bond yield jumped to 2.345%, its highest level since 1994, while the yen rallied to around 153 against the U.S. dollar.

Goldman Sachs analysts led by former Bank of Japan (BOJ) chief economist Akira Otani believe that the bank may be nearing a policy pivot amid the yen’s rally.

If the yen strengthens further toward 130/USD, the central bank could pause rate hikes and slash its inflation outlook for 2026. A weaker yen past 160, meanwhile, could force tighter policy, the analysts said in a Monday report.

Either way, global markets are watching closely, and crypto may be one of the first to feel the heat.

“Major shift” for risk assets

Bitcoin, which thrives in environments of excess liquidity, faces the risk of capital rotation as Japanese yields rise.

Higher fixed-income returns and tightening policy typically draw institutional money away from speculative assets, especially those like Bitcoin that rely heavily on liquidity conditions.

“The macroeconomic trends in Japan, signaled by the current surge in the 30-year bond yield, signal a major shift coming for risk assets,” said Agne Linge, Head of Growth at decentralized bank WeFi told Decrypt. 

Beyond institutional rotation, Linge warned of a more structural consequence, “The yen carry trade thrives when investors borrow yen at a cheaper rate… With bond yield soaring, the need to take the yen to invest in other assets is limited.

Other analysts say Bitcoin’s recent stability, trading near $85,600, may not hold if Japan tightens further.

Aravanan Pandian, CEO and Founder of crypto exchage KoinBX, told Decrypt that the BOJ’s historically loose policy has been a key pillar of global risk appetite. That may be changing.

“If the BOJ ends or drastically tightens its yield curve control (YCC), there might be a significant repatriation of capital, particularly from crypto assets,” he said. “Historically, risk-off sentiment is indicated by a stronger yen, which tends to lower speculative exposure across portfolios.”

Yield curve control (YCC) is a policy tool where the central bank targets specific long-term interest rates by buying or selling government bonds.

Pandian also said that a Japanese policy shift could ripple far beyond crypto, and could “trigger a wider rethinking of central bank autonomy and global debt sustainability,” he said.

Still, not everyone sees doom for digital assets. The Federal Reserve is facing mounting pressure to cut rates amid cooling CPI and PPI growth, potentially offsetting Japan’s hawkish tone.

While speaking with Decrypt, Marcin Kazmierczak, co-founder and COO of modular oracle RedStone, pointed to historical precedent from 2016, when the Bank of Japan last pivoted to tightening, as a comparable moment, “Bitcoin initially dropped 15% before rebounding strongly within six months,” he said.

A temporary blip?

While Goldman Sachs analysts have warned that a stronger yen could lead to capital flight from digital assets, Kazmierczak argued that the crypto market is far more robust than in previous cycles.

“Bitcoin’s 21-million-coin supply cap continues to position it uniquely against these shifting monetary policies,” he added, suggesting that the current downturn may be “temporary rather than structural.”

While Japan’s policy path is in focus, U.S. economic signals also weighed on sentiment. Bitcoin saw an uptick on Monday, as investors digested rising inflation expectations and recession risks.

A Fed survey showed consumers expect 3.6% inflation over the next year, with 44% anticipating higher unemployment, marking the highest anxiety levels since April 2020.

As of now, Bitcoin is trading at around $85,210, up 0.6% over the past 24 hours, and 8.2% rise in the past week, per data from CoinGecko.

Predictors on MYRIAD, the decentralized prediction market launched by Decrypt’s parent company DASTAN, appeared cautiously optimistic Tuesday, with 55% expecting Bitcoin to hold $85,000 through Wednesday.