The Japanese Yen is falling again.

Major financial giants like JPMorgan and BNP Paribas have recently turned bearish, predicting that by the end of 2026, the USD/JPY exchange rate could break through the 165 level. That’s a 10% depreciation from the current level. It sounds a bit alarming, but the logic behind it is quite clear—The Bank of Japan is really starting to struggle.

Where's the problem? The ongoing inversion of the US-Japan interest rate differential. On one side, the Federal Reserve maintains a hawkish stance with high interest rates; on the other side, the Bank of Japan’s rate hikes can’t keep up, with the next increase not expected until September. As a result, the arbitrage trading of borrowing yen to buy high-yield assets is reigniting, with investors using nearly free yen loans to hunt for global profits. Plus, domestic retail investors and companies in Japan are frantically moving capital abroad, making a yen rebound virtually impossible.

Even more painfully, real interest rates are still in negative territory, and with inflation exceeding the 2% target, government bond pressures are mounting. Even if the BOJ wanted to intervene, analysts say—mere rhetoric and smoothing operations won’t save the yen; this is a structural issue, not a technical one.

This is the interesting part: Japan’s capital outflow has hit a ten-year high, with Japanese funds outflowing by 9.4 trillion yen just this year. Where has all this money gone? Bonds, stocks, real estate… But here’s the question: could some of it quietly be flowing into crypto assets?

Think about this logic: in a risk-on environment, cryptocurrencies—being highly volatile and high-potential assets—are indeed attractive to Japanese investors eager to preserve and grow their wealth. Especially top-tier coins like BTC and ETH, with sufficient trading depth and liquidity, are likely to become the safe haven choices for yen holders. This isn’t just speculation; it’s based on historical patterns—every macroeconomic currency crisis has seen funds seeking new escape routes.

But the situation on the Fed’s side also puts pressure on crypto. If the dollar continues to strengthen, it will indirectly suppress USD-denominated crypto assets—that’s a common headwind for coin prices. However, if the ongoing inflow of capital into yen can create enough hedging, the situation might reverse. This tug-of-war between two forces is the undercurrent in the recent crypto market.

The BOJ’s helplessness, investor despair and arbitrage, and Japan’s capital outflow—these factors combined could indeed trigger a new wave of capital flowing into crypto markets. What do you think? Will the yen’s depreciation trigger a crypto boom among Japanese funds?