Stronger Yen Policy Could Boost Dollar Liquidity and Fuel Bitcoin Rally

Arthur Hayes, co-founder of BitMEX, believes that a stronger yen policy by the U.S. and Japan could boost dollar liquidity and drive up the price of Bitcoin.

In his Substack post titled 'Yen-quake' published on August 10, Hayes outlined three ways to push the yen higher: aggressive rate hikes by the Bank of Japan, a shift by the Japanese government away from overseas assets and toward domestic investment, and using U.S. Treasuries as collateral to access the Federal Reserve's FIMA Repo Facility.

The third option is the scenario most favored by the U.S. and Japan, according to Hayes. Under this approach, Japan would pledge its Treasury holdings to the Fed, borrow dollars and sell them in the foreign-exchange market to buy yen, strengthening the yen without requiring large-scale sales of U.S. government debt.

Hayes cited recent joint intervention by the U.S. and Japan in the foreign-exchange market, as well as comments from U.S. Treasury Secretary Scott Bessent about expanding the FIMA repo limit, as evidence that the two countries are pursuing a new exchange-rate policy.