One of the biggest stories emerging from the Far East this month is the imminent release of a blockchain-based version of Japanese Yen, one of the world's leading Fiat currencies.
The timing of this development was not improved as the Bank of Japan (BOJ) is widely expected to raise interest rates soon. This is likely to increase the appeal of both yen and yen assets.
Earlier this month, Coindesk reported that Japan's Financial Services Agency (FSA) is likely to approve the country's first stubcoin, the country's first yen religion, as early as this fall. According to the report, Tokyo-based fintech company JPYC is planning to register as a remittance transfer business within a month and plans to take the lead in the deployment of stubcoin on its JPY page.
Stablecoins are cryptocurrencies that are fixed to external references such as the US dollar, euro, and yen. These tokens play a key role by promoting capital transfers used for transactions, investments, remittances, or international payments, while bypassing the volatility normally associated with other cryptocurrencies.
JPYC is not just pursuing stablecoins in circles. Last week, Tokyo-based financial services company Monex Group announced that it was considering launching its own JPY Stablecoin aimed at international remittances and corporate settlements. Matsumoto, chairman of Monex Group, told local media:
BOJ Rate Hiking
Both major bankers and traders hope BOJ will raise rates in the coming months, but the US Federal Reserve is doing the opposite.
Nakazaki Kando, head of Hokkai Financial Group, one of Japan's largest regional banks, said over the weekend that interest rates could be raised in either October or December, assuming “things go smoothly.”
Hokhoku Financial Group shares are the best performing bank stock this year, with prices rising 90% above the Topix Banks Index, which includes 70 lenders.
Nakazaki's outlook is consistent with the broader market consensus on upcoming rate hikes. According to Bloomberg Economics, the recently released Tokyo Inflation Report may have reinforced BOJ's view that consumer price momentum remains strong and that it will achieve its 2% target. The team predicts a 25 basis point rate hike at the BOJ's October meeting.
The expected rate hike could encourage investors to move their funds to JPY-backed stubcoins. Remember that the 2022 Fed Rate Hiking Cycle was seen as increasing demand for standard-style, ridiculous stubcoins.
BOJ has recently raised two hikes from 0.1% to 0.25% in July last year, and another 25 basis point hikes in January. Since then, central banks have been stabilizing their rates.
Japan's harvest has risen, with BTC/JPY drops
Yet yields on long-term Japanese government bonds (JGB), the third largest government debt market after the US and China, have risen to multi-year highs, reflecting fiscal concerns and strong expectations for an imminent BOJ rate hike.
For example, JGB yields in 30 years have recently skyrocketed to a record high of over 3.2%, but 10 years yield reached 1.64%, reaching levels not seen since 2008.
In addition to the appeal of the yen, the narrow gap between the US and Japan's 10-year yields tightened to 2.62%, the lowest since August 2022. The USD/JPY exchange rate closely tracks this yield difference, so macromicro regression analysis suggests that it should trade at around 144.43 compared to the level on Friday.
In other words, regression analysis points to the valuation of the circle.
Enhanced yen and hiking at expected rates also means BTC/JPY drawbacks. The cryptocurrency pair listed on Bitflyer fell 8% this month, reaching its lowest level since July 9th. This recent sale has sparked a classic double-top bearish reversal pattern on the daily charts.
Technical analysis using measured travel methods suggests that double-top failures could lead to a price of around 14,922,907 JPY. This target is calculated by subtracting the height between the two peaks and the tentative trough from the low to the trough, indicating further negative side risk for Bitcoin priced in yen.
