Japan's 30-Year Bond Yield Reached Record 4.223%, Posing Risk to Bitcoin via Carry Trade

On Friday, Japan's 30-year government bond yield reached a record 4.223%, the highest since the security was first issued in 1999.

Yields are climbing across the maturity spectrum. Thursday saw the 10-year note hit 3.055%, a level not seen since August 1996.

Why Japan’s 30-Year Bond Yield Keeps Climbing

Policy moves are a key factor. The Bank of Japan (BOJ) increased its benchmark rate to 1.25% on September 18, the highest since 1995. Although the vote was 7-2, the bank indicated that additional increases are possible, per its official statement.

Fiscal pressures are also mounting. According to Reuters, government ministries have submitted budget requests totaling a record ¥143.1 trillion for the 2027 fiscal year. Debt repayment costs alone stand at ¥36.64 trillion. Additionally, the Finance Ministry increased its assumed borrowing rate to 3.8%, up from 3%.

Sales of foreign bonds have affected Tokyo markets as well. On September 15, the US 10-year Treasury yield surpassed 5% amid a global bond sell-off. Subsequently, the Federal Reserve raised its target range to 3.75%-4%.

The yen has not gained from these moves. After the BOJ's rate decision, the currency weakened toward 158 per dollar. A comparable pattern occurred in August when Japan's 2-year yield reached a 31-year peak.

Katsutoshi Inadome, from Sumitomo Mitsui Trust Asset Management, connected these developments.

“Japanese bond yields are facing upward pressure as inflation concerns grew on a weaker yen.”

What Japan’s Record Yield Means for Bitcoin

As safe-haven returns increase, the threshold for riskier assets becomes higher. Japanese 30-year bonds now offer over 4%, potentially attracting money away from cryptocurrencies.

A bigger danger lies in the yen carry trade. In this strategy, investors borrow yen at low rates and invest in assets offering higher returns elsewhere. A sudden strengthening of the yen would raise the cost of those loans and could trigger sell-offs.

This risk has historically affected cryptocurrencies severely. When the yen experienced a shock in 2024, Bitcoin and Ethereum dropped about 20% as carry trades were closed.

Currently, Bitcoin (BTC) is trading around $84,033, a fall of 0.5% over the past day, per BeInCrypto data. The large spread between United States and Japanese interest rates maintains the viability of the carry trade.

Thus, the yen could be the key indicator. A sharp turn in the USD/JPY exchange rate would indicate that carry trades are being unwound, potentially impacting Bitcoin rapidly.