Yen Breaches 160 Despite Record Intervention, Raising Crypto Unwind Risks

Japan’s long era of low interest rates made the yen a major funding currency for carry trades, in which investors borrow cheaply and buy higher-yielding assets overseas. The strategy can support equities, bonds and cryptocurrencies when exchange rates are stable, but a stronger yen or higher Japanese borrowing costs can force leveraged positions to unwind. That makes Bank of Japan policy signals relevant well beyond foreign-exchange markets, with bitcoin particularly exposed to sudden shifts in global liquidity and risk appetite.

The yen recently weakened to about 163.99 per dollar, its lowest level since 1986, before the Bank of Japan’s July 30-31, 2026 policy meeting. Markets expect the central bank to keep its policy rate at 1%, while watching for hawkish guidance on further tightening. The risk is informed by the July 31, 2024 rate increase: bitcoin subsequently slid from roughly $65,000 to $50,000 in early August as the yen strengthened and carry trades were unwound.