Yen slides past 160 despite $97 billion defence, carry trade risk returns for Bitcoin
The dollar-yen exchange rate is back at levels that unsettled global risk markets last year. Japan's yen fell to 160.16 per dollar on 28 August, giving up more than half its gains from a month of heavy official support that cost…
Key takeaways
- Japan's yen fell to 160.16 per dollar on 28 August, erasing more than half its gains from a month of official support.
- Tokyo spent roughly $97 billion (¥15.4 trillion) defending the yen between 30 July and 26 August, including a rare joint operation with the US on 31 July.
- US rates remaining higher than Japan's continues to pressure the yen, and Bitcoin briefly fell below $77,000 after Fed chair Kevin Warsh pledged to bring inflation to target.
- A sharp yen rise can trigger unwinding of yen-funded carry trades, a dynamic that in August 2024 saw Bitcoin and Ethereum lose up to 20%.
- Metaplanet CEO Simon Gerovich said in Hong Kong that Asian savers are ready to move from cash into Bitcoin and that he believes 'the bottom is in.'
The dollar-yen exchange rate is back at levels that unsettled global risk markets last year. Japan's yen fell to 160.16 per dollar on 28 August, giving up more than half its gains from a month of heavy official support that cost Tokyo roughly $97 billion, and the move is reigniting concern over yen-funded carry trades.
The intervention math
Japan spent ¥15.4 trillion defending its currency between 30 July and 26 August, a campaign that included a rare joint operation with the United States on 31 July, when both governments bought yen to lift its value. The scale of the outlay is notable. So is how little it has held.
The rate differential tells the story. US interest rates remain higher than Japan's, making dollar-denominated assets more attractive and keeping steady pressure on the yen. Federal Reserve chair Kevin Warsh reinforced that gap this week, pledging to bring inflation to target. Bitcoin ($BTC) briefly fell below $77,000 after the speech as investors expected higher US rates.
The carry trade channel
Some investors borrow yen at low cost and deploy the proceeds into higher-yielding assets elsewhere. When the yen rises sharply, those borrowers face larger repayment costs in their home currencies and may sell assets to cover the gap.
That mechanism played out in August 2024. A reversal in yen-funded positions amplified selling across crypto markets, and both Bitcoin and Ethereum suffered losses of up to 20%. A fresh round of Japanese intervention, or a surprise rate increase in Tokyo, could set off a comparable dynamic.
Against that backdrop, Metaplanet chief executive Simon Gerovich offered a longer-dated view. Speaking in Hong Kong this week, Gerovich argued that Asian savers are ready to move beyond cash and into Bitcoin. Metaplanet holds Bitcoin as its core asset, giving Gerovich a direct financial stake in that thesis. "The buyers arriving now aren't going anywhere. I believe the bottom is in. And I'm expecting a much brighter rest of the year," Gerovich said.
The near-term picture is less settled. As long as the yen stays under pressure and US rates remain elevated, the conditions that produced last year's carry trade unwind remain in place.
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