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🚨 JAPAN JUST HIT A HISTORIC CENTRAL BANK TRAP The Bank of Japan just raised interest rates to 1.25%, marking their highest level since 1995 Yet despite the rate hike, the Japanese Yen dropped lower against the US dollar To understand why this happened, you have to look at the central bank trap: WHY CAN’T JAPAN JUST KEEP RAISING RATES TO SAVE ITS CURRENCY? For decades, Japan kept interest rates near zero so people could borrow money almost for free Investors worldwide borrowed cheap Yen and poured that capital into higher-yielding assets like US stocks, bonds, and crypto That giant trade became known as the global Yen Carry Trade Now Japan is caught between two bad choices: 1) Government debt servicing costs have jumped from ¥8.5 trillion in 2023 up to ¥13 trillion in 2026 2) US interest rates (3.75%–4.00%) still pay far more than Japanese rates (1.25%) If Japan smashes interest rates much higher to close that gap, it would immediately hit: > Government borrowing expenses > Corporate loans and business debt > Home mortgages across Japan > Japanese government bond prices > Overall economic growth That is why 1.25% is still cheap money, and why the Yen remains weak HOW THIS IMPACTS BITCOIN AND CRYPTO: As long as Japan avoids aggressive rate hikes, cheap Yen liquidity continues to flow into global risk assets like Bitcoin However, if currency volatility forces Japan into a surprise rate hike down the road, it could trigger a sudden unwinding of the Yen carry trade, creating short-term volatility spikes across crypto Japan cannot defend its currency without hurting its own economy, so they are choosing to tolerate a weaker Yen Bookmark this post. I will keep you updated as the macro structure develops

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