🇯🇵📉 Japan rates are suddenly all over X. People are posting scary charts of the 10-year JGB going from 1% to 2% and jumping straight to “global collapse” and “Bitcoin is next.” They are wrong. Let’s analyze and do a deep dive. 1/N

🇯🇵🇺🇸 Japan is a beast of its own and very different from the U.S. For the last two decades, Japan has lived under zero interest rates and QE — effectively a flat yield curve pinned at zero. 2/N

In that zero-rate world, Japan’s life insurance companies — led by Nippon Life — were completely starved for yield. These are among the most conservative financial institutions on the planet. They’re not speculators. 3/N

But they still need roughly 2–3% returns to meet long-dated pension and insurance obligations. With JGB yields pinned at zero, that was impossible at home. So they did the only rational thing: they bought U.S. Treasuries and mortgages, and hedged most of the currency risk back into yen. 4/N

🇯🇵🇺🇸 Up until 2022, this worked reasonably well. Interest rates were effectively zero in both the U.S. and Japan, so FX hedging costs were minimal. Meanwhile, U.S. rates were still meaningfully higher than Japan’s, which solved the insurers’ core problem: yield. 5/N

When Jerome Powell ramped rates past 5%, that entire setup broke. FX hedging costs exploded and completely wiped out any yield when converted back into yen. But these are slow, cautious institutions. They didn’t panic or dump Treasuries. They simply stopped buying. 6/N

Ironically, hedging back into yen turned out to be exactly the wrong move. Over the last decade, the yen did almost nothing but fall — from roughly ¥80 per dollar in 2012 to ¥160 at the lows in 2024. Staying unhedged would have been enormously profitable. But these are cautious institutions, not risk-takers. They hedge because that’s what conservative balance sheets are designed to do. And that same yen depreciation — while painful for insurers — massively benefited Japanese exporters like Toyota, juicing margins and profits for years. 7/N

What finally forced Japan to move wasn’t bond vigilantes or some abstract fear of debt. It was inflation and wages. After decades of deflation, Japan started running sustained inflation above 2%, and — more importantly — wages finally began to rise. At that point, zero rates stopped being “supportive” and started actively hurting savers, insurers, and households. The BOJ didn’t want to raise rates. It simply ran out of reasons not to. 8/N

🇯🇵🇺🇸 So now Japan has rising rates — a bit like the U.S. in 2018. And just like the U.S. back then, this probably can’t go very far without a rejection. Japan can raise rates, but it can’t normalize them in the Western sense. Short-term rates might drift toward 1–2%, but there are clear limits. Over time, the U.S. and Japan are likely to converge again on the short end, while the long end keeps a positive spread. That’s the environment where carry trades start to work again — slowly, and without drama. 9/N

So what does this mean for Bitcoin? Probably nothing extreme. This isn’t a 2008-style event, and it’s not some hidden systemic break. It’s slow normalization after decades of distortion. If anything, over time you could even see ultra-conservative institutions like Japanese life insurers start to think about Bitcoin — not as a trade, but as a small, uncorrelated asset in portfolios that have been starved of real yield for years. 10/N