Weakened Yen Sparks Renewed Risk for Bitcoin and Crypto Markets

Japan's yen has continued to weaken despite nearly $97 billion in government support. The currency fell to 160.16 against the US dollar on August 28, losing more than half of its gains since authorities intervened last month.

The yen's decline increases the cost of imported goods and puts pressure on Japanese households and businesses. Japan has spent ¥15.4 trillion supporting the yen between July 30 and August 26, including a coordinated intervention with the US on July 31.

However, this effort has faded as US interest rates remain above Japanese rates, causing investors to favor dollar-denominated assets. The dollar received additional support after Federal Reserve Chair Kevin Warsh reiterated his commitment to bringing inflation back toward the Fed's target.

The yen's weakness also poses a risk for Bitcoin through the yen carry trade. Investors have historically borrowed yen at low interest rates and invested in higher-yielding assets overseas.