The "intervention" that the US has made in order to "save" the Yen this weekend has a lot of people riled up - something like this is unprecedented, to say the least.
Over the last few decades, the Yen has been sitting at very low interest rates, between 0-1%, also known as the "Yen Carry Trade". It's sort of an open secret that these low-interest loans have been fueling a lot of the tech asset "growth" for a long time, including the crypto hype that happened in 20'-21', and the AI hype cycle we find ourselves in now.
"Growth" is in quotes because a lot of people will argue that the numbers we see now are largely fueled by debt/inflation rather than real growth, in two industries that have yet to turn a profit, even now. People inside the bubble like to pretend that this doesn't matter, but history always shows that, well, supply and demand is still a thing.
If this was the only "emergency" happening right now, it probably wouldn't matter all that much. But in parallel, we also have these things going on:
- US interest on debt surpasses military spending (first time since the Great Depression)
- Real-estate bubble: home prices continue to rise while sales continue to dwindle
- Circular financing in AI - an industry that has yet to turn a profit
- US interest rates starting to rise in response to runaway inflation
- Tariffs, wars, and disruptions in the Middle East driving up the cost of everything
- Credit card debt, bankruptcies and foreclosures at all-time highs
- Governments are broke because people are spending less, due to inflation
- Foreign countries are switching over from using the dollar onto the Euro or Yuan due to perceived instability in the US.
All of these trends point in the direction that the stock markets and the dollar itself is on a path towards collapse. But let's look at it from Japan's point of view - they've been wanting to raise interest rates for a while because they've been lending the US massive amounts of money to fuel Wall Street's gambling addiction for a long time. They are ready to cut them off, for the betterment of their own currency and arguably for Americans' own good, because the Yen carry trade has been enabling the US's destructive spending sprees as well.
But nope - Americans are so addicted to debt that they're willing to go way out of their way to "bail out" the system that enabled all of this to begin with, even at the cost of its long-term health. A lot of economists were expecting the Fed to raise interest rates to curb its own inflation, but it seems like it just pushed the search for low interest rates overseas, rather than addressing the problem at its root.
Hard to say what will happen in the immediate future, but at some point, Japan will have to walk away from US debt, too - which means they will have to raise interest rates to prevent their own currency's collapse. Given the current administration's temperament a fine line will have to be walked, but even allies will have to draw the line somewhere.
In the midst of this, Japan also did something unprecedented - it officially reclassified crypto as a financial asset and announced plans to slash the capital gains tax from a punishing 55% to just 20%, part of the reason why domestic adoption had remained so low. This signals that Tokyo is preparing for wider institutional integration of the technology, not just retail speculation.
Institutional players have largely agreed that 2026 would mark the bottom of the crypto cycle, but the question remains: Is this the trigger that many of us have been waiting for? Are we ready to onboard a new type of participant into the industry?