Yen in Collapse: Why the Bank of Japan Lost Control of the Currency ( and What It Means for Bitcoin )

The Japanese yen has reached historic lows, even after the Bank of Japan raised interest rates to 0.75% — the highest level in three decades. The situation reveals a harsh reality: the market had already priced in this move, rendering it ineffective in stopping the ongoing devaluation.

The Trap of Negative Real Rates

While nominally 0.75% seems significant, inflation remains above this level, keeping real rates in negative territory. This does not discourage carry trade — on the contrary, it fuels it. Traders sell yen at depreciated rates and buy dollars, taking advantage of interest rate differentials. To put it into perspective: 11 million yen is approximately 75 thousand dollars, and this ratio only worsens for those holding yen.

The Return of Carry Trade Operations

Traders are back in full force. The strategy is simple: borrow yen at low rates, sell for dollars, and allocate into higher-yield assets. This amplifies pressure on the yen. The lack of clarity in the Bank of Japan’s communications and the country’s chronic debt issues do not help — in fact, they worsen the situation by leaving room for continued speculation.

Implications for Bitcoin and Altcoins

Historically, interest rate hikes have pushed Bitcoin downward. But in this particular scenario, the yen’s weakening acts as a counterbalance. If the USD/JPY pair breaks the 160 mark, the risk of Japanese government intervention increases dramatically, creating volatility in global markets.

Altcoin traders should stay alert: changes in carry trade flows can unexpectedly reallocate capital, affecting cryptocurrency behavior. Keeping an eye on altcoins while these movements unfold is essential.