For a long time, the Japanese bond market has been largely flat. However, recently, the yield on the 30-year Japanese government bond has crossed the 3% threshold for the first time since 2000. This event has not only attracted the attention of investors, but also raised dire warnings about the possibility of a widespread liquidity squeeze that could affect risky assets like Bitcoin.
Japan bond shock sends warning to global markets
For the first time in 23 years, the yield on Japan’s 30-year government bond jumped 10 basis points (bps) to 3.065%. This is a significant milestone because Japan has long been a symbol of loose monetary policy, with near-zero interest rates and a long-term quantitative easing (QE) program. The fact that the yield on these long-term bonds crossed the 3% threshold was not only a shock to the bond market, but also a sign of a change in monetary policy in an economy that is struggling with problems ranging from high public debt to an aging population.
Analyst Fernando Pertini said the event could be an “early warning” for larger fluctuations in global financial markets. He stressed that Japan, although not the largest economy, has unique characteristics such as huge public debt and low inflation, which will have an important impact on global financial trends. A change in Japanese policy could prompt other countries to follow, especially the United States, which has recently shown signs of shifting monetary policy.
“Japan’s 30-year bond yield has broken through 3%, its highest level since 2000. An economy with massive public debt, a rapidly aging population and the world’s lowest inflation is now leading the global bond market decline. This is a warning sign: The United States may not be far behind. It may not be that Japan is reacting to the world, but rather that the world is following Japan’s lead,” Pertini said.
Impact on Risk Assets: Bitcoin and Financial Markets
This shift will not only affect the bond market but also have a strong impact on risk assets, especially cryptocurrencies like Bitcoin. According to market analyst BitBull, the Japanese bond yield breaking above 3% could be a major turning point, marking the beginning of a broader liquidity tightening cycle. This could reduce the flow of money into risk assets, thereby putting pressure on cryptocurrencies.
“Japan’s 30-year bond yield just crossed 3% for the first time in decades. While it may not sound like much, it is an important signal… As interest rates start to rise, it means liquidity could tighten across the board. Less money flowing into the market will put more pressure on risk assets like Bitcoin and altcoins. This could be the ‘Black Swan Event’ of the current financial cycle,” BitBull said.
Exante Data confirmed that the 30-year Japanese bond yield was the most statistically significant mover among the G10 bond markets over the past 24 hours, further reinforcing this view.
“The biggest mover in the last 24 hours has been the Japanese 30-year bond yield. During this period, G10 bond yields have recorded two notable moves with strong standard deviations: Japan 30-year, Sweden 2-year, Japan 10-year and 30-year, Sweden 5-year,” the firm said.
Despite this, Bitcoin has remained surprisingly stable. As of press time, BTC is trading around $108,867, fluctuating within a tight range. According to Shawn Young, chief analyst at MEXC Research, although Bitcoin’s momentum has slowed, the market structure remains bullish:
“…While Bitcoin’s upside momentum has slowed somewhat, the bullish market position and overall technicals remain structurally sound. BTC continues to hold above the key psychological support level of $100,000, having bounced from $98,000 during the war-induced decline. Additionally, Bitcoin has formed strong support levels in the $106,500 region,” Young shared.
Bitcoin’s Unusual Stability May Attract Risk-Averse Investors
In a volatile financial market, Bitcoin’s unusual stability could be an attractive signal to risk-averse investors. Ark Invest analyst David Puell said that the rare calm in the market amid the overall volatility could attract the attention of risk-averse investors. He noted that from May to October 2023, both the market’s wide volatility deviation and extreme slope were positive and uninterrupted, which is different from previous bull cycles.
“We believe this is what will appeal to risk-averse investors,” Puell stressed.
Meanwhile, institutional accumulation continues to grow. Genius Group, a public education company known for its “Bitcoin first” strategy, has increased its treasury target tenfold. CEO Roger Hamilton shared the company’s unwavering belief in Bitcoin in a post on X, revealing:
“We are seeing the value of the Bitcoin we have purchased for our Bitcoin Treasury increase, and are excited to announce our Treasury target of 10,000 Bitcoin.”
As Japanese bond yields rise, concerns about a possible tightening of global liquidity are growing. The effects of this shift are likely to extend beyond the Japanese economy, affecting risk assets and especially cryptocurrencies. Analysts agree that this could be a sign of a new macroeconomic reality, where monetary policy in major economies will gradually adjust to deal with high public debt and rising inflation.
Therefore, although the crypto market, especially Bitcoin, remains stable in the short term, investors need to closely monitor macro developments, because a small change in global monetary policy can also create large impacts on these assets.
In that context, maintaining a flexible and prudent investment strategy is extremely important.