Bitcoin’s Currency Divide: BTC Gains in Dollars but Falls Behind as Yen Strengthens

Bitcoin’s gains look weaker in yen terms as Japanese currency rebound pressures crypto pairs

Bitcoin and other major cryptocurrencies are performing well globally, but their gains appear more muted for Japanese investors as the yen strengthens sharply against the U.S. dollar.

BTC, XRP, and other leading digital assets have continued to rise in dollar-based markets, but their performance against the yen has lagged due to the Japanese currency’s recent surge.

The yen strengthened to 161.55 per dollar from 162.42 earlier in the day, reducing the gains of yen-denominated crypto pairs. Bitcoin traded on Tokyo-based BitFlyer’s BTC/JPY market was up only 0.68%, compared with a 1.15% increase in the U.S.-listed Nasdaq BTC/USD pair. Similar trends were visible across XRP/JPY, SOL/JPY, ETH/JPY, and other yen-based cryptocurrency pairs, which gained but trailed their USD equivalents.

The yen’s recovery comes as investors grow concerned about potential intervention from the Bank of Japan or coordinated action by policymakers after the currency dropped to a four-decade low earlier this week. Historically, Japan has intervened by selling dollars and purchasing yen to support the currency, though those measures have typically provided only short-term relief. Persistent fiscal concerns in Japan and higher U.S. interest rates have often encouraged traders to resume selling the yen after intervention moves.

Market expectations for further Bank of Japan rate increases also strengthened after Japan’s June producer price index showed annual growth of 7.1%, the fastest pace since March 2023. Rising wholesale inflation has increased speculation that the central bank could accelerate rate hikes. A former BOJ official recently warned that rates could eventually rise above 2%.

Despite the current divergence, bitcoin and the yen have developed an unusual relationship, often moving in the same direction against the U.S. dollar. If this correlation continues, periods of yen strength could eventually support bitcoin’s broader performance, even if BTC/JPY and other yen-based crypto pairs temporarily underperform.

Potential impact of Japan’s pension fund shift

Another factor drawing attention is Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, which manages around ¥277 trillion ($1.87 trillion) in assets. The fund has major exposure to global equities and bonds.

The Japanese government is now exploring ways to encourage GPIF and other pension funds to increase investments in domestic assets, a move that could create volatility across global markets.

Analysts at InvestingLive noted that GPIF held approximately ¥293.4 trillion, or about $1.81 trillion, in assets at the end of December, with allocations spread relatively evenly among Japanese stocks, foreign stocks, domestic bonds, and overseas bonds.

Because of the fund’s enormous size, even modest changes to its investment strategy are closely watched by global bond, currency, and equity markets. A shift toward more domestic holdings could have significant effects beyond Japan.

Japan’s Finance Minister Satsuki Katayama said Friday that the government wants to examine ways to encourage GPIF to increase its exposure to Japanese financial assets. The discussion comes as Japanese government bond yields remain near their highest levels in three decades.

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