“Bitcoin Traders Eye Japan as Leading Economist Flags Potential Debt Crisis”

Japan’s Debt Crisis Could Boost Demand for Crypto and Stablecoins – 17/9/2025

As Japan teeters on the edge of a debt crisis, investors may increasingly turn to alternative financial safe havens such as cryptocurrencies and stablecoins. While much of the market focus has been on the U.S., senior economist Robin Brooks of the Brookings Institution warns that Japan’s fiscal risks deserve close attention. A potential U.S. recession might offer temporary relief, but the underlying debt challenges remain significant.

Japan’s Mounting Debt
Japan consistently carries the highest debt-to-GDP ratio among advanced economies, hovering above 200%. Post-COVID fiscal stimulus and sticky inflation—now at levels not seen since the 1980s—have added pressure on government finances. Rising consumer prices have pushed bond yields higher, increasing borrowing costs and highlighting the country’s debt burden of roughly 240% of GDP.

Brooks summarized the dilemma in a recent Substack post:
“Low interest rates risk further Yen depreciation and runaway inflation; higher yields threaten debt sustainability. Japan faces a catch-22, bringing a debt crisis closer than many realize.”

Shift to Alternative Assets
Growing debt concerns are drawing attention to stablecoins. Japanese startup JPYC plans to launch the first Yen-pegged stablecoin later this year. The Yen has strengthened nearly 7% against the U.S. dollar this year to 146.50, though it has depreciated 41% since 2021, contributing to domestic inflation. Meanwhile, Japanese bond yields are at multi-decade highs, reflecting investors’ caution.

Potential Relief from a U.S. Recession
A U.S. economic slowdown could push global investors into government bonds, lowering yields and providing Japan with temporary breathing room. Brooks notes:
“Falling yields may buy Japan time, but sustainable solutions require spending cuts or tax hikes.”

The key question remains whether Japan’s citizens will accept these fiscal adjustments—a decision that will shape the country’s financial trajectory.

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