Key Insights
- The crypto market is entering a slower phase as rising Japan bond yields change global money flows and funding behavior.
- Higher yields in Japan reduce the appeal of borrowing cheap yen, which can limit capital moving into crypto and other risk assets.
- Global liquidity is still growing, but at a pace that supports stability more than strong upside momentum right now.
The broader crypto market is starting to feel the heat as the first month of 2026 comes to a close. This can happen due to several reasons, but this time the real culprit is something else. Global money flows start to adjust.
One of the key changes right now is coming from Japan, where rising bond yields are slowly reshaping how and where global capital prefers to sit.
Japan’s Bond Yields are Rising After Years of Calm
Japan’s government bond yields have moved higher and reached levels not seen for a long time. A bond yield is the return investors earn by lending money to the government. When yields rise, holding bonds becomes more attractive.
For many years, Japan kept interest rates very low. This made borrowing cheap and predictable. Because of this, Japan became a major source of low-cost money for global markets. That money quietly moved into stocks, credit, and other assets around the world.
Now that bond yields are higher, lending money inside Japan looks more appealing than before. This does not pull money out in one go. Instead, it changes preferences slowly.
Money begins to pause. Investors think longer before moving funds into higher-risk areas. This shift does not signal trouble. It signals adjustment. For global markets, including crypto, this means the easy background support from Japan is no longer as strong as it once was.
The Yen Carry Trade is Becoming Less Central
One of the biggest ways Japan influenced global markets was through the yen carry trade. This is a simple idea. Investors borrowed yen at low cost and used that money to invest elsewhere where returns looked better.
This process helped keep money moving steadily across global markets. It did not create excitement, but it provided stability.
As Japan’s bond yields rise, this trade becomes less appealing. Borrowing costs move higher, and investors become more selective. They focus more on safety and steady returns. This does not mean money stops flowing. It means money flows with more care.
For crypto, this often shows up as slower price action. Instead of fast rallies, prices move in ranges. Buyers and sellers take time to adjust to new conditions.
This phase can feel quiet, but it often plays an important role. It allows markets to reset expectations and build stronger foundations. One of the reasons why safer assets like gold and silver are getting attention.
Global Liquidity is Growing, But Timing Matters
Another important factor is global liquidity. This is often measured using global M2, which includes cash and bank deposits across major economies.
Right now, global M2 is growing at about 11.4% year over year. This shows that money conditions are improving compared to the previous year. In earlier Bitcoin cycles, stronger price expansions often aligned with M2 growth closer to 14%. This tells us liquidity is rising, but it has not yet reached its most supportive phase.
Japan’s bond yield shift fits into this picture. While global money supply continues to grow, some traditional funding channels are slowing. This creates a period where markets move sideways rather than strongly upward.
For the crypto market, this kind of environment often brings uneven trading. Prices move, but without strong follow-through. It is part of how markets adjust when money is choosing its next direction.
Source: https://www.thecoinrepublic.com/2026/01/21/crypto-market-pulls-back-as-japan-bond-yields-hit-new-highs/
