Japan's 30-year government bond yield reached a record 4.223% on Friday, marking the highest level since the maturity was introduced in 1999. Concurrently, the 10-year bond yield hit 3.055% on Thursday, its peak since August 1996. These shifts follow the Bank of Japan's decision on September 18 to raise interest rates to 1.25%, the highest level since 1995.
Fiscal pressures are mounting as government ministries requested a record ¥143.1 trillion for fiscal 2027, with debt servicing costs estimated at ¥36.64 trillion. The Finance Ministry has also increased its assumed borrowing rate from 3% to 3.8%. Despite these adjustments, the yen has weakened toward 158 per dollar following the central bank's policy announcement.
Market analysts suggest that rising yields in Japan could impact risk assets like Bitcoin by drawing capital toward safer returns. A significant concern remains the yen carry trade, where investors borrow low-interest yen to purchase higher-yielding foreign assets. A potential rally in the yen could force the liquidation of these positions, historically leading to volatility in crypto markets.
Bitcoin is currently trading near $84,033, reflecting a 0.5% decline over the past 24 hours. The persistence of the carry trade is supported by the interest rate differential between the US and Japan. Market observers are monitoring the USD/JPY exchange rate, as a sudden reversal could signal a broader unwinding of leveraged positions that may negatively affect digital asset prices.
