Bitcoin Faces Japan Rate Hike: Debunking The Yen Carry Trade Unwind Alarms, Real Risk Elsewhere

Source: CryptoNewsNet Original Title: Bitcoin Faces Japan Rate Hike: Debunking The Yen Carry Trade Unwind Alarms, Real Risk Elsewhere Original Link: With the Bank of Japan (BOJ) expected to hike rates next week, some observers are worried that the Japanese yen could surge, triggering an unwinding of “carry trades,” crushing bitcoin.

Their analysis, however, overlooks actual positioning in the FX and bond markets, missing the nuance and far more likely risk that Japanese yields, by anchoring and potentially lifting global bond yields, could eventually weigh over risk assets rather than the yen itself.

Popular yen carry trades

Before diving deeper, let’s break down the yen carry trade and its influence on global markets over the past few decades.

The yen (JPY) carry trade involves investors borrowing yen at low rates in Japan and investing in high-yielding assets. For decades, Japan kept interest rates pinned near zero, prompting traders to borrow in yen and invest in U.S. tech stocks and U.S. Treasury notes.