Japan’s 40-Year Bond Yield and Its Implications for the Crypto Market

Japan’s 40Y Bond Yield has reached 2.85%, nearing a historic 3% high, raising concerns about potential impacts on U.S. yields and the crypto market.

According to Trading Economics, Japan’s 40-year Bond Yield peaked at 2.85% on March 10, based on interbank yield quotes. The last recorded high of 3% was in January 2011 and again in January 2024.

As the holder of the world’s largest debt pile, exceeding its $5 trillion economy, Japan faces high costs to roll over its debt at increasing yields. With the Bank of Japan owning about 70% of government bonds, doubts about its sustainability may arise.

For decades, Japan has maintained low rates. However, rising 40Y Bond Yields might indicate a shift in domestic inflation and interest rates. Higher yields could attract Japanese investors back to domestic bonds over lower-yielding U.S. Treasuries, reducing demand for the latter and potentially increasing U.S. yields.

Increased U.S. yields could elevate borrowing costs for both the government and private companies, simultaneously strengthening the U.S. dollar and impacting the demand for riskier assets like crypto.

A chart from TradingView shows an inverse relationship between the U.S. dollar index and Bitcoin prices. This suggests that higher dollar values often lead to declines in the crypto market.

As conventional assets provide better returns, investors might shift funds away from crypto and stocks to safer investments. Rising government yields can indicate tighter global liquidity, which can be detrimental to the crypto market, often reliant on loose monetary conditions.

Overall, Japan’s increasing 40Y Bond Yield could pose risks to cryptocurrency by strengthening the dollar, tightening liquidity, and diverting funds from riskier investments.

Read more: Japan PM highlights crypto’s significance ahead of the 2025 crypto tax review.