Japan : The Weak Link Challenging the Global Economic Order

Japan : Quiet Crack in the Global Economy

A financial crisis always starts in a specific place. In 2008, it was the Lehman Brothers bank that took down the entire American banking sector, triggering a global recession. Today, all signals indicate that Japan could be the next weak link in the international financial system.

The outlook is particularly bleak for the Japanese economy:

• A debt/GDP ratio of about 250%, among the highest in the world
• A plummeting demography, with 30% of the population aged over 65 years
• Anemic economic growth for decades
• Rampant inflation driving up the prices of basic products like rice

But the real danger lies in the Japanese bond market, currently under unprecedented pressure. In May 2025, yields on 30-year government bonds surpassed 3%. Those on 40-year bonds hit 3.6%, a historical record. This bond market tension could be the first domino in a long line. It is an economic time bomb threatening to impact crypto portfolios, compel central banks to raise rates, and plunge the world into a recession comparable to that of 2008.

Yen Carry Trade : A Double-Edged Sword

To grasp the magnitude of the risk, one must revisit the “yen carry trade” mechanism that has shaped the global economy in the past two decades.

For 17 years, interest rates at the Japanese Central Bank (BOJ) remained near zero or even negative. This ultra-accommodative monetary policy created a massive arbitrage opportunity for investors worldwide:

1. Borrow yen at almost zero interest
2. Convert these yen into dollars or euros
3. Invest these currencies in high-yield assets (tech stocks, bonds from other countries, etc.)
4. Profit from the difference between the borrowing cost (close to zero) and the investment returns (5% or more)

This seemingly risk-free mechanism was heavily exploited by hedge funds, banks, and investment funds globally. Billions and billions of yen were borrowed to be invested overseas, creating a global artificial bubble with significant leverage. However, in 2024, the BOJ ended the party by raising its key rates to 0.25%. While this level may seem trivial, it represents the highest rate since 2007.

Bitcoin: Ultimate Safe Haven in the Storm

It is in this context that Bitcoin and cryptocurrencies emerge as a credible alternative to the traditional financial system. More and more economic players, including in Japan, are turning to these digital assets as a safe haven against the instability of the debt-based system.

Several recent developments underline this trend:

• Japanese company Metaplanet adopting a strategy similar to Michael Saylor (MicroStrategy), borrowing to buy more Bitcoin
• By the end of 2024, Japanese lawmaker Satoshi Hamada proposed that the country build a national Bitcoin reserve to shield against economic risks
• In March 2025, Japan’s Government Pension Investment Fund, the world’s largest pension fund with $1.43 trillion in assets under management, discussed adopting a Bitcoin strategy

These initiatives are not isolated. They are part of a broader movement questioning the traditional financial system. The end of easy money heralds a new economic model, with a new monetary order where cryptocurrencies could play a central role.

In a world where fiat currencies are devalued by expansionary monetary policies and sovereign debts reach unsustainable levels, Bitcoin emerges as a “digital Noah’s ark” – a refuge against the looming financial storm.

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