Japan's 10-Year Bond Yield Hits 29-Year High, Raising Risk of Yen Carry-Trade Unwind and Bitcoin Rout

Japanese government-issued 10-year bonds are an important global benchmark for interest rates and funding costs. Japan's persistently low rates have encouraged investors to borrow yen and invest in higher-yielding assets such as Bitcoin. As Japanese rates rise, those carry-trade returns shrink, and position unwinding could develop into a wave of deleveraging across markets.

Japan's 10-year government bond yield recently rose to 2.665%, its highest level since 1997 and in nearly 29 years. Markets fear that higher yen borrowing costs could force investors to sell risk assets to repay their loans, exposing Bitcoin to a repeat of the sharp decline triggered by the carry-trade reversal in August 2024.