The Japanese bond market upheaval triggers global capital reallocation—what is the risk level in the crypto circle?

Overlooked Financial Signals

Recently, the English community on platform X has been discussing one thing—the abnormal fluctuations in Japan’s long-term government bond yields. However, this information is rarely mentioned in the Chinese crypto circle. This is very dangerous.

Why? Because the underlying logic of global finance over the past thirty years is undergoing a fundamental change.

The “Golden Age” of Carry Trade Is Crumbling

Have you ever wondered why US stocks, US bonds, and crypto assets have continued to rise over the past thirty years?

The core lies in a financial instrument: Carry Trade.

This mechanism is simple:

• Japan has maintained near-zero interest rates for a long time
• Investors borrow yen at extremely low costs
• Convert yen into USD and other currencies
• Invest in global assets (US stocks, bonds, real estate, even crypto)
• Earn dual profits from exchange rate differences and asset appreciation

How large is this money? Industry estimates reach trillions of dollars. Japan has essentially become a global “perpetual motion machine,” continuously exporting cheap liquidity.

The Rules of the Game Have Changed

By November 2025, everything is accelerating:

• 20-year Japanese government bond yields approach 2.8%
• 40-year Japanese government bond yields rise to 3.7%

This is not a mild policy adjustment but a fierce rebound after thirty years of suppression.

Chain Reactions Are Starting

What will happen when borrowing yen is no longer “almost free”?

First impact: The interest rate differential in carry trade disappears. Borrowing costs soar, and the original arbitrage logic is completely broken.

Second impact: Yen appreciation brings exchange rate risks. Many leveraged positions denominated in yen face forced liquidation pressure.

Third impact: Capital flows reverse. Trillions of carry trade funds begin to withdraw from global markets and flow back to Japan. This is equivalent to simultaneously draining liquidity from various asset classes worldwide.

The Real Dilemma Facing the Crypto Circle

Before this macro tsunami, recent pump-and-dump activities in the crypto space seem insignificant.

Many investors are now “bottom-fishing”—trying to acquire cheap chips during the decline. But the hidden danger here is: the “bottom” you see may just be a temporary rebound during the exit of carry trade funds.

From another perspective: when the underlying water tap of global finance shifts from “continuous supply” to “active withdrawal,” no asset class can remain unaffected.

The Cycle of History

Japan has played the role of the “ultimate contributor to finance” over the past thirty years—under zero interest rate policy, it endured currency depreciation and capital outflows, yet provided cheap funds to the global market.

Now, as the Bank of Japan is forced to tighten policies, it has transformed from a financial exporter to a liquidity “extractor.”

How to Respond

This is not about promoting pessimism but a reminder: in the face of macro changes, micro-level bottom-fishing and stop-loss operations need to be reassessed.

The key fact to recognize is: the disintegration of carry trade signals the end of an era. Assets that rely on continuous external liquidity face a systemic re-pricing process.

For crypto participants, understanding this macro shift is far more important than blindly chasing rallies or panic selling.