How Does the Weakness of the Japanese Yen Affect Bitcoin?

In recent days, the fluctuating movements in the market have drawn investors' attention to developments in Bitcoin (BTC) and the Japanese yen. Historically, when the Japanese yen depreciates, an increase in risk appetite is expected; however, current conditions may reverse this situation.

Japan's growing debt burden and fragile economic situation could negatively impact international market risk appetite. In recent weeks, the Japanese yen has significantly weakened against the dollar, raising the question of whether investors' 'risk appetite will shift?' Under normal circumstances, carry trade flows would increase the preference for riskier assets like stocks and Bitcoin. However, Japan's economic situation complicates this classic cycle.

The debt-to-GDP ratio reaching 240% of Japan's national income is noteworthy. The government's announcement of a $135 billion new stimulus package could increase, rather than ease, the debt burden. As the need for increased borrowing raises government bond yields, the Japanese yen continues to depreciate. This situation contributes to the weakening of the traditional carry trade model and fails to provide a clear risk appetite signal to the markets.

Rising interest rates pose a potential threat of a financial crisis for Japan, while maintaining low interest rates could lead to further depreciation of the Japanese yen. This chaos increases uncertainties surrounding Japan's monetary policy and reduces the attractiveness of the Japanese yen as a safe haven and funding currency. Experts emphasize that this fragile situation makes it difficult to gauge risk perception through the Japanese yen.

A new currency that investors are currently focusing on is the Swiss franc. With near-zero policy rates and long-term bond yields around 0.09%, the franc is becoming an attractive funding tool again. Analysts suggest that Bitcoin investors might find it more effective to track the movements of the Swiss franc instead of the Japanese yen to understand market sentiment.