Bitcoin's quiet split: Strong in USD, lagging in JPY as Yen rises on intervention fears

Bitcoin $BTC$64,020.28, $XRP ($XRP), and other major cryptocurrencies are buoyant worldwide, but a bit less so in Tokyo, and it’s due to the sharp upswing in the Japanese yen.

The yen has jumped to 161.55 per USD from 162.42 per USD earlier today. That move has meant $BTC/JPY listed on Tokyo-based BitFlyer is only up 0.68% versus a 1.15% gain in the U.S.-based Nasdaq’s $BTC/USD pair. The same pattern holds for $XRP/JPY, SOL/JPY, ETH/JPY, and other JPY pairs – they are up, but clearly underperforming their USD-denominated counterparts.

Yen’s rise comes amid renewed fears of possible Bank of Japan (or coordinated) intervention after the JPY fell to a 40-year low earlier this week. The BOJ has historically intervened by selling dollars and buying yen to prop up its currency, though those efforts have largely delivered only temporary effects. Japanese fiscal concerns and relatively higher U.S. interest rates have repeatedly led traders to resume selling the yen shortly after interventions.

Early today, traders received Japan’s producer price index for June, which came in at 7.1%, the fastest annual increase since March 2023. The spike in wholesale inflation reinforced expectations for further Bank of Japan rate hikes. A former central bank official said Thursday that the BOJ may hike rates faster, potentially pushing them above 2%.

Note that the Japanese yen and Bitcoin have developed an unusually strong positive correlation, often moving in lockstep against the U.S. dollar. If that correlation holds, yen upswings may ultimately prove positive for bitcoin in general, even as $BTC/JPY (and other crypto/JPY) pairs continue to lag in relative terms.

The GPIF Risk

The Government Pension Investment Fund (GPIF) of Japan manages roughly ¥277 trillion ($1.87 trillion) in assets, making it the world’s largest retirement fund. It invests heavily in global stocks and bonds.

Now the Japanese government wants the GPIF and other pension funds to invest more in local assets. Such a rotation could trigger volatility in global financial markets.

"The fund, one of the largest pension pools in the world, held 293.4 trillion yen, or roughly 1.81 trillion dollars, in assets at the end of December, maintaining roughly equal allocations across domestic equities, foreign equities, domestic bonds and foreign bonds," analysts at InvestingLive said in a market update.