Economist: Japan's debt crisis risk may drive up demand for cryptocurrencies

PANews reported on September 17 that economist Robin Brooks analyzed that Japan is facing a potential debt crisis, with its debt-to-GDP ratio reaching approximately 240%, further exacerbated by inflation and rising bond yields. However, a US recession could provide a brief window of relief for Japan, lowering global bond yields and easing fiscal pressure.

Brooks noted that Japan currently faces a dilemma: maintaining low interest rates could lead to further depreciation of the yen and runaway inflation; allowing yields to rise further to stabilize the yen could jeopardize debt sustainability. This dilemma could prompt investors to turn to alternative financial instruments such as cryptocurrencies and stablecoins. Notably, Japanese startup JPYC plans to issue its first yen-pegged stablecoin this year.

In addition, the yen has depreciated by 41% since 2021, exacerbating domestic inflationary pressures. At the same time, Japan's 10-year government bond yield has risen from near zero in 2020 to 1.60%, the highest level since 2008, and the 30-year yield has also reached a multi-decade high, reflecting investors' concerns about fiscal risks.

Brooks believes that a U.S. recession could temporarily lower Japanese bond yields, buying Japan time. However, a long-term solution would still require spending cuts or tax increases, but whether the Japanese public would accept such measures remains uncertain.