Japan's 30-Year Bond Yield Surges 12 Basis Points to 2.345%

Japan’s 30-year bond yield has surged to the highest level in 20 years, increasing by 12 basis points to 2.345%, the highest level since 2004. This surge signals deepening stress in global fixed-income markets and is bearish on Bitcoin (BTC) and other risk-on assets. Agne Linge, director of growth at decentralized on-chain bank WeFi, agrees that growing bond yields threaten crypto in the short term. She cited macroeconomic trends in Japan as they pertain to the current surge in the 30-year bond yield.

“With the bond yield jumping 2.345% to its highest level in 30 years, more risk-averse institutional investors might shun Bitcoin and other speculative assets,” Linge stated. As Japan’s long-term bond yields surge, pressure is mounting on the Bank of Japan (BoJ) to respond with a possible interest rate hike. Analysts say this could happen as early as the end of April. If the BoJ tightens policy, it would mark a significant shift for a central bank that has maintained ultra-loose monetary conditions for decades.

“If this forecast plays out as expected, it might lead to dried-up liquidity in the traditional financial market. Since crypto thrives more on excess monetary liquidity, this could also influence the performance of the asset shortly,” she added. Linge cited the yen carry trade as one of the risk mechanisms. In this strategy, global investors borrow yen at low interest rates to invest in higher-yielding assets abroad. Trade thrives when Japanese rates are low and the international risk appetite is strong.

As Japanese yields rise and the prospect of a BoJ rate hike grows, the incentive to borrow yen diminishes. This could lead to an unwinding of the carry trade, potentially draining liquidity from global markets. Such an outcome would amplify downside risk for crypto and other risk assets, which aligns with recent reports that Bitcoin’s price is at risk as the reverse yen carry trade unwinds.

The problem today is that those borrowing costs are starting to get more expensive. Traders who were able to access virtually free capital for years are now finding themselves sitting on costly margin positions that they’re potentially being forced to unwind. Meanwhile, the Federal Reserve (Fed) is facing increasing pressure to cut interest rates and PPI (Consumer Price Index and Producer Price Index, respectively) support this push. Lge observes that dovish signals in the US could partially offset this emerging hawkish stance from Japan.

“Since the US is a bigger market, the world may respond more toward the country’s monetary policies than Japan,” Linge added. The Fed’s move to ease monetary conditions while Japan tightens could create a mixed global liquidity environment. This could spur volatility as investors reassess cross-border capital flows. Nonetheless, the yen carry trade remains especially vulnerable to the BoJ’s decisively hawkish shift. This could trigger a repricing of risk globally, curbing speculative flows and weakening the liquidity backdrop that crypto markets have benefited from in recent years.

Amidst these concerns, however, traders and analysts remain optimistic. Analysts at Deribit recently observed that markets switched from capitulation to aggressive bounce. “Protective/Bear play BTC 75-78k Puts were dumped, and 85-100k Calls were lifted as BTC surged from 75-85k,” they wrote. Deribit data corroborates this observation, showing the $100,000 call strike price was the most popular call option as of this writing, recording the highest open interest. This suggests bets that Bitcoin could draw toward this psychological milestone.