Japan's Rate Hike Sparks Carry Trade Fears and Bitcoin Volatility

Japan's interest rates have hit their highest levels since 1996, reaching 4.185% for the 30-year government bond yield and 2.945% for the 10-year bond yield.

This marks a significant shift from the country's long reliance on negative interest rates to combat deflation.

The yen carry trade has been a major driver of global risk asset markets, with investors borrowing cheap yen to buy higher-yielding assets in other countries.

However, Japan's Bank of Japan (BoJ) raised its policy rate to 1.0% in June, and markets expect another rate hike at the September 17-18 monetary policy meeting.

This has put pressure on the yen, which has given back over half of its gains from currency intervention and is currently weakening against the dollar to around 159.