Analysis: Link between weak yen and risk asset rally is fading

The long-standing trend of a weaker Japanese yen providing a tailwind for risk assets like Bitcoin is diminishing, according to an analysis by Coindesk. The report suggests that the yen is failing to function as a safe-haven asset due to Japan's severe debt issues. This weakens the incentive for yen carry trades, thereby failing to stimulate investment demand for risk assets like Bitcoin and other altcoins. Additionally, the correlation between Japanese government bond yields and the exchange rate has reportedly collapsed, showing that market sentiment is reacting sensitively to Japan's fiscal problems. Coindesk emphasized that Japan is in a difficult position: allowing interest rates to rise could trigger a full-scale fiscal crisis, while freezing them would lead to a sharp depreciation of the yen and a surge in import prices.