Written by: Blockchain Knight

The fluctuations of Japan's long-term government bonds are by no means isolated events; they signal the gradual tightening of the last source of cheap capital globally, which will ultimately impact even those holding Bitcoin.

For decades, Japan's nearly zero-cost monetary circulation has profoundly influenced global markets, and this era is coming to an end.

In December 2025, the Bank of Japan raised the benchmark interest rate to 0.75%, reaching a nearly 30-year high, marking a significant shift in its ultra-low interest rate policy.

As a global financing center, Japan's policy adjustments will inevitably trigger market restructuring, and long-term government bonds are continuously sending out dangerous signals.

The yield on Japan's 40-year government bonds has first broken through 4%, once rising to 4.2%; the auction demand for 20-year government bonds was weak, with a subscription multiple of 3.19 below the 12-month average; the yield on 30-year government bonds climbed to 3.46%, a significant increase from 2.32% a year ago.

These data reveal a decline in market demand for Japanese government bonds, as investors begin to question the future sources of capital and the yield levels required to maintain stable capital operations. This slow change is fundamentally reshaping the market landscape.

Although cryptocurrencies often claim to be "outside the existing system," they are still constrained by the global interest rate environment.

Rising long-term interest rates will reconstruct the pricing logic of capital, raising the investment threshold for all high-risk assets, and Bitcoin is no exception.

A BlackRock report pointed out that Bitcoin's historical performance is similar to that of gold and emerging market currencies, being sensitive to real interest rates in the U.S. dollar.

Following hawkish remarks from the Governor of the Bank of Japan, a global bond sell-off occurred, and Bitcoin fell by 5.5% that day, with its monthly decline expanding to over 20%, confirming the correlation between the two.

The core impact mechanism stems from yen arbitrage trading, where global investors have borrowed yen at low interest rates for years to invest in high-yield assets, creating a sustained demand for risk and return.

The tightening of Japanese policy has led to a stronger yen and rising financing costs, forcing the unwinding of arbitrage trades, which often becomes chaotic due to risk limits and margin calls.

As one of the most liquid risk assets globally, Bitcoin is often the first to be sold off during leveraged withdrawals.

Three major scenarios may unfold in the future:

First, Japan gradually raises interest rates, the bond market stabilizes, and cryptocurrencies face ongoing headwinds but still have room for growth;

Second, auction pressures trigger global duration panic, global yields soar, and stocks and cryptocurrencies face forced sell-offs;

Third, policy intervention stabilizes the market, yields stop soaring, global liquidity expectations improve, and cryptocurrency pressures ease.

Additionally, stablecoins, as the core of the internal currency system of cryptocurrencies, will see their liquidity change with shocks to traditional monetary policy, further impacting the crypto market.

Essentially, Japan's re-adjustment of monetary prices after decades will have repercussions across the global leverage and risk system. Due to their strong liquidity, globalization, and around-the-clock trading attributes, cryptocurrencies will inevitably respond in sync.

The key to the future trend of the crypto market lies in whether the Japanese bond market can remain calm and whether the pressure signals released by long-term monetary policy will persist.

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