Bitcoin’s recent rally may be running into headwinds as surging Japanese government bond (JGB) yields and a weakening yen dampen risk sentiment across global markets.

Just days ago, Bitcoin reached new all-time highs in both U.S. dollar and Japanese yen terms, buoyed by optimism around Japan’s new Prime Minister Takaichi Sanae and her commitment to reviving the Abenomics-style ultra-loose policy framework.

Yet that same pro-growth stance is now unsettling bond markets. Abenomics relies on aggressive fiscal spending and easy monetary conditions — both of which increase government borrowing needs. The result: a surge in JGB yields as investors anticipate greater bond issuance and fiscal strain.

According to TradingEconomics, Japan’s 10-year government bond yield climbed to 1.70% early Wednesday — its highest since July 2008 — up 13 basis points in a week and 76 basis points over the past year. The 30-year yield briefly touched 3.34% before easing to 3.16%.

Higher yields generally weigh on risk assets by raising borrowing costs and encouraging investors to favor safer returns in sovereign debt. While some view Bitcoin as a “digital gold,” historical data show it tends to track equity and tech-sector risk trends more closely than traditional safe havens.

Analysts warn that the latest spike in Japanese yields could ripple through global bond markets. Goldman Sachs noted that volatility in JGBs could spill into U.S. Treasuries and European sovereign debt, with “every 10-basis-point JGB shock adding roughly two to three basis points of upward pressure on U.S., German, and U.K. yields,” according to a recent note cited by Bloomberg.

Yen Depreciation and Dollar Strength Add Pressure

The U.S. dollar index (DXY) climbed to a two-month high this week, led by renewed weakness in the Japanese yen, which has fallen 3.5% against the dollar since Friday. The decline reflects investor expectations that the Bank of Japan (BoJ) will delay further rate hikes, following Prime Minister Sanae’s renewed endorsement of accommodative Abenomics policies.

A stronger dollar typically leads to tighter financial conditions, often limiting upside potential in Bitcoin, gold, and other dollar-denominated assets.

While Bitcoin’s momentum has paused amid the macro uncertainty, gold continues to outperform, breaking above $4,000 an ounce as investors rotate toward safe-haven assets in response to the rising bond yields and currency volatility.