Bitcoin shows strength in dollars but trails in yen as Japanese currency rebound impacts crypto markets

Bitcoin and major cryptocurrencies are continuing their global recovery, but the gains appear less impressive for investors trading in yen as a sharp rise in Japan’s currency reduces returns compared with dollar-based markets.

BTC, XRP, and other leading digital assets have performed well against the U.S. dollar, but their yen-denominated pairs have struggled to keep pace amid the yen’s recent rally.

The yen climbed to 161.55 per dollar from 162.42 earlier in the session, creating a noticeable gap between BTC/USD and BTC/JPY performance. Bitcoin’s pair on Tokyo-based BitFlyer gained 0.68%, while the BTC/USD market on Nasdaq advanced 1.15%. Similar underperformance was seen across XRP/JPY, ETH/JPY, SOL/JPY, and other yen-linked crypto pairs, which remained positive but delivered smaller gains than their USD counterparts.

The yen’s recovery has been fueled by renewed speculation that Japanese authorities may intervene after the currency reached a 40-year low earlier in the week. The Bank of Japan has previously supported the yen by selling dollars and purchasing the currency, though such interventions have usually had limited lasting impact. Persistent concerns over Japan’s fiscal position and higher U.S. interest rates have often encouraged traders to return to yen-selling strategies.

Expectations for further monetary tightening from the BOJ increased after Japan’s June producer price index showed a 7.1% annual increase, the fastest pace since March 2023. The stronger inflation data added pressure for additional rate hikes, with a former central bank official suggesting that rates could eventually move above 2%.

Despite the short-term weakness of yen-based crypto pairs, bitcoin and the yen have shown an unusual correlation, often moving together against the dollar. If that relationship remains intact, yen appreciation could eventually benefit bitcoin’s broader outlook, even if BTC/JPY and other JPY-denominated assets continue to lag in the near term.

GPIF asset allocation shift draws global attention

Markets are also monitoring potential changes involving Japan’s Government Pension Investment Fund (GPIF), which manages approximately ¥277 trillion ($1.87 trillion), making it the world’s largest pension fund.

The Japanese government is considering encouraging GPIF and other pension managers to increase investments in domestic assets, a move that could influence global capital flows.

Analysts at InvestingLive said GPIF held roughly ¥293.4 trillion, or about $1.81 trillion, in assets at the end of December, with investments divided among Japanese equities, foreign equities, domestic bonds, and overseas bonds.

Given the fund’s enormous size, even small portfolio adjustments could create significant effects across currency, bond, and equity markets worldwide.

Japan’s Finance Minister Satsuki Katayama said Friday that officials want to explore ways to increase GPIF’s exposure to Japanese financial assets. The discussions come as Japanese government bond yields remain near their highest levels in three decades.