Yen weakness persists despite monetary tightening: what it means for Bitcoin and altcoins

The Paradox of Interest Rates in Japan

The Bank of Japan (BOJ) moved the market by raising its benchmark rate to 0.75%, reaching the highest level in three decades. However, this action did not produce the expected effect of strengthening the local currency. The yen remains depreciated, with the USD/JPY rate reflecting persistent pressure in the exchange rate. When converting 11000 JPY to USD, we clearly see how the Japanese currency has lost purchasing power against the US dollar.

The macroeconomic scenario explains part of this paradox: although nominally rates have increased, real rates remain negative when adjusted for inflation, reducing the attractiveness of yen-denominated assets for international investors.

The Return of Carry Trade Operations

The currency weakness has revived carry trade operations, the old scheme where traders borrow in low-interest currencies (such as the yen) and invest in higher-yield assets denominated in other currencies (mainly dollars). This capital outflow from Japan adds pressure on the currency, creating a depreciation cycle.

The vague communication from the BOJ and the persistent public debt challenges of the country amplify uncertainties, keeping alive this capital flight dynamic that the rate hikes attempted to interrupt.

Implications for Bitcoin and the Crypto Market

Historically, rate hikes have harmed Bitcoin. The logic is simple: higher real rates increase the opportunity cost of assets that do not generate interest. However, the current scenario is more nuanced.

If the pressure on the yen continues and the USD/JPY surpasses 160, the BOJ may be forced to intervene in the currency market, which could have systemic effects. Some analysts warn that such a move could generate volatility in crypto markets, affecting not only Bitcoin but also altcoins.

Traders should closely monitor altcoins as capital flows reorient globally. The weakness of the Japanese currency may channel resources into risk assets in emerging markets and the crypto sector, depending on how monetary authorities respond.