Japan's Rate Hike Sparks Global Crypto Liquidity Crisis
Japanese government bond yields have surged to multi-decade highs, reaching 3.88% for 30-year JGBs and 2.34% for 10-year yields on January 20.
The yield spike has made the yen carry trade less attractive, potentially reversing capital flows that have funded global risk assets for decades.
Japan holds $1.2 trillion in U.S. Treasury securities as the largest foreign holder, providing trillions in overseas liquidity through ultra-low domestic rates.
Rising yields increase the opportunity cost of carry trades, forcing repatriation of capital from global markets to Japan.
Czhang Lin, head of LBank Labs, warned that rate normalization is 'unwinding the carry trade fuel that's greased global risk assets for years, flipping liquidity from a gush to a grind.'