US-Japan Yen Intervention Revives Bitcoin Fears of Carry-Trade Unwind

The yen’s sharp rebound after a joint foreign-exchange intervention by the US and Japan has revived concern in the Bitcoin market over a potential unwind of yen carry trades.

Japanese Finance Minister Katayama said in a statement on Aug. 3 that authorities bought yen on July 31, US Eastern time, in coordination with the US Treasury Department. The move was meant to counter excessive volatility and disorderly moves in the yen. He added that the two governments would not hesitate to carry out further joint intervention, signaling more action could follow.

The yen-buying operation came after the Japanese currency weakened to nearly 164 per dollar in July, its lowest level since 1986. It marked the first joint yen-buying intervention by the US and Japan since 1998. Following the move, the dollar-yen rate dropped from 164 to the 155 range.

Expectations are also building for further yen strength through year-end. In an Aug. 5 report, Bank of America said the dollar-yen rate could fall to 149 by the end of 2026 if the Bank of Japan raises interest rates in September after the joint intervention by Washington and Tokyo.

Markets are now closely watching how further yen gains could affect Bitcoin. In August 2024, a surprise Bank of Japan rate increase triggered an unwind of yen carry trades, sending Bitcoin down about 20% in a week from around $62,000 to about $49,000.

Analysts are divided over how much the latest intervention will affect Bitcoin. Crypto analyst Crypto Rover said Bitcoin’s major corrections this year repeatedly coincided with periods when the Japanese government stepped in to defend the yen.

He cited declines of 35.43% in January-February and 26.28% in April-June. He also said Bitcoin came under renewed pressure in late July, when the yen weakened to 164 per dollar, pointing to the risk of another carry-trade unwind.

Crypto analyst Ted Pillows said Bitcoin could fall to $50,000 if the CLARITY Act is rejected and the unwind of yen carry trades accelerates.

Others argue that a stronger yen does not necessarily translate into Bitcoin weakness. Omkar Godbole, a senior analyst at CoinDesk, said the 52-week rolling correlation between Bitcoin and the dollar-yen exchange rate recently fell to minus 0.90.

That suggests Bitcoin has been driven more by broad US dollar strength than by moves in the yen itself, he said, meaning the impact of yen appreciation could be limited.

Michaël van de Poppe, founder of MN Fund, offered a similar view. He said continued yen strength and dollar weakness could shift money out of safe-haven assets such as US Treasuries and into risk assets, benefiting Bitcoin. Even if another short-term correction emerges, Bitcoin would still have a strong chance of resuming its upward trend afterward, he said.

Market participants also point to one key difference from 2024. This time, Japan secured dollars without selling US Treasuries through the Foreign and International Monetary Authorities, or FIMA, repo facility. That could limit the financial-market shock from any yen carry-trade unwind compared with the previous episode.