Japan government bond yields hit a 17-year high…Bitcoin's rally stalled

Son Min

Summary

Japan's 10-year government bond yield rose to a 17-year high, putting pressure on risky assets including Bitcoin.
Yen depreciation and dollar strength are increasing global bond market unease and could reduce the investment appeal of dollar-denominated assets.
While Bitcoin's recent rally has stalled, gold prices have surpassed US$4,000 per ounce, reflecting safe-haven preference.

Japan's 10-year government bond yield has surged to its highest level in 17 years, weighing on risky assets including Bitcoin (BTC). Analysts say the combination of yen weakness and dollar strength is amplifying unease in the global bond market.

On the 8th (local time), according to CoinDesk, the Japanese 10-year bond yield rose to 1.70%, marking the highest level since July 2008. That is an increase of 13bp (0.13% points) from last week and 76bp (0.76% points) compared with the same period last year. The 30-year yield also climbed to 3.34% before easing to 3.16%.

The sharp rise in yields is interpreted as a market reaction to newly inaugurated Prime Minister Sanae Takaichi's announcement that she would strengthen the Abenomics policy stance. One key pillar of Abenomics is expansionary fiscal policy, and increased government spending leads to more government bond issuance, putting upward pressure on yields.

Goldman Sachs said, "Volatility in Japanese government bond yields could spread to the US, German, and UK government bond markets," adding that "a 10bp (0.1% point) rise in Japanese yields could put 2–3bp of upward pressure on major-country yields."

Generally, rising yields increase borrowing costs and reduce the attractiveness of risky assets. Although Bitcoin is called 'digital gold', it actually moves similarly to tech stocks and tends to weaken during periods of rising rates.

Meanwhile, the dollar rose to its highest level in two months, helped by yen weakness. The Dollar Index (DXY) is composed of six major currencies including the euro, yen, and pound, and the yen has the second-largest weight among them. Recently, the yen has fallen 3.5% against the dollar, which is seen as reflecting lowered expectations for a rate hike by the Bank of Japan (BoJ).

Dollar strength can reduce the appeal of dollar-denominated assets and limit price gains for Bitcoin and gold. In fact, while Bitcoin's recent rally has cooled, gold has broken above US$4,000 per ounce, reflecting safe-haven sentiment.