Bitcoin weathers rapid yen surge as Tokyo spends $95B
Tokyo spent about $95 billion in August defending the yen as USD/JPY fell from 160.39 to 154.50 in three sessions; Bitcoin remained above $79,000.
Japan spent nearly $100 billion in August to support the yen. Traders pushed USD/JPY from 160.39 on Wednesday to 154.50 by Monday, a 3.7% appreciation for the yen over three sessions, and there was no confirmed new intervention during that move. Bitcoin stayed above $79,000, avoiding the large declines seen after a similar yen surge in August 2024.
The Ministry of Finance reported foreign reserves fell $94.6 billion in August to $995 billion. Foreign securities declined by $87.8 billion, which the ministry said indicates Tokyo sold short-dated U.S. Treasuries to fund currency defence.
In August 2024, a rapid yen appreciation prompted investors to unwind yen-funded carry trades, forcing sales of equities and cryptocurrencies; Bitcoin and Ethereum fell as much as 20% then. The recent three-session appreciation tested leveraged positions but did not trigger comparable liquidations.
Market pricing reflects expectations of higher Japanese interest rates. Traders currently assign about 75 basis points of cumulative Bank of Japan rate increases by April 2027. A 25 basis-point move next week would raise policy rates to roughly 1.25%.
Hajime Takata, a BOJ board member, urged policymakers to act “nimbly” against rising inflation. Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, projected the central bank could begin raising rates in September and then possibly continue on a quarterly basis through January 2027.
Akira Nishimura, an economist at Japan Research Institute, warned: “Japan still has room to intervene given the amount of securities it holds, but selling U.S. Treasuries to fund further intervention could end up attracting pressure from the U.S.” He added that such a scenario would leave the Bank of Japan to assume a larger share of the burden.
The decline in foreign securities and the market’s rate expectations narrow the tools available to Japan. If the government limits further Treasury sales, monetary policy will be the remaining instrument to address exchange-rate volatility.
Market participants are watching the speed and size of any further yen moves and any policy responses from Tokyo and the BOJ for signs of renewed stress in risk assets and leveraged positions.
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