Will Golden Coins Shine in Nippon’s Novelty Act?

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Japan, in its indomitable elegance, has approved a 21.3 trillion yen ($135.5 billion) stimulus package, triumphantly marking the nation’s most grandiose economic escapade since the Corsican intrigue we call COVID-19. 🏯

Upon hearing the news, the yen followed its heart-or perhaps its slide-and descended to its lowest dance against the US dollar since January 2025. Meanwhile, Japan’s 40-year bond yield leapt to a record minuet of 3.697%, as if attempting a somersault worthy of the circus. 🎪

A Stimulus Shrouded in Mystique

Central to this package, much like the hero of a Wildean drama, are three goals: taming the beast of rising prices, fueling robust growth, and amplifying defense and diplomacy. According to the NHK report, and in a display typically reserved for masquerade balls, it includes local government grants and energy subsidies, bequeathing about 7,000 yen to households over three months-savour this number, my friends! 💰

Defense spending holds a hand to caution, making a gallant push to reach 2% of GDP by 2027. The supplementary budget hopes to pass by year’s end, clasping its hopes in the hands of allies. Despite just holding 231 of 465 Lower House seats, the ruling coalition appears quite confident-or is it merely audacious? 🌟

Japón’s economy, alas, has faltered of late. The GDP fell by 0.4% quarter-on-quarter in Q3 2025, marking a decline unseen in an epoch of 18 months. Inflation, that slippery eel, has been soaring above the Bank of Japan’s 2% target for 43 consecutive months, reaching a startling 3% in October 2025. Yet, the government hums an optimistic tune, expecting the stimulus to buoy real GDP by 24 trillion yen, with the total impact shimmering near $265 billion. 🌊

Despite these bravura attempts to breathe life into growth, certain naysayers persist. The Nikkei breathes whispers of caution over the prolonged employment of fiscal stimuli beyond the realms of emergency. On November 20, the price of five-year credit default swaps on Japanese government bonds leapt to 21.73 basis points-a crescendo not heard in six months, mirroring investor fears of default risk. 🪂

Economic Masquerade: Currency Tango and Bond Jitters

The yen’s precipitous descent post-announcement rings alarm bells over its currency stability, with promises of government intervention swirling like an inviting, yet treacherous, waltz. The vast fiscal boost, coupled with persistent inflation, may yet see capital flowing out. Although October exports rose by 3.6% year on year, such modest gains pale in the face of broader financial concerns. ⚖️

BREAKING: Japan’s government whispers of “intervention” before the Yen to Dollar duet reaches 160.

In just two months, the Yen descended from 145 to 157, spurred by a $110B+ stimulus package.

Lo and behold, a mere ~2% away from “intervention.”

– The Kobeissi Letter (@KobeissiLetter) November 21, 2025

Now, markets cast their gaze upon the 40-year bond yield, which pranced to a historic 3.774% on Thursday. Typically, such measures would pirouette to reduce long-term rates, yet this rise signals heartburn about looming inflation and fiscal health. Every 100-basis-point leap in yields demands 2.8 trillion yen more in annual government financing, fueling a crescendo of fears about unsustainable debt. 💡

This yield spike applies pressure to the illustrious $20 trillion yen-carry trade, where investors lend on the cheap and invest outward, much like Austen’s characters in search of fortune. Higher yields and yen appreciation could unravel this complex waltz swiftly, causing asset sales globally. Historical data suggest a 0.55 correlation-nearly as dramatic as the weather in a Wilde comedy-between yen carry trade unwinding and S&P 500 declines. 📉

Wilted or Flourishing: The Fate of Bitcoin and Other Risk Assets

The stir of a new stimulus package sends mixed signals for Bitcoin and other risk assets. More liquidity, like a flowing river, often supports a demand for alternatives, especially when local currencies lose their luster. When the yen weakens, it sends the average Japanese investor in search of alternative assets such as Bitcoin. The Bank of Japan maintains its key rate at a stately 0.5%, yet a rise looms if inflation remains as obstinate as a Wildean hero. 🎭

Analysts herald this as one of the strongest macro tailwinds for Bitcoin as we waltz into 2026. Japan’s novel move, alongside potential US Federal Reserve easing, US Treasury cash drawdowns, and China’s liquidity injections, could serve as a grand ballroom for risk assets to gain new value. 🥳

Yet, higher bond yields flirt with risk. Their promenade could lead to a hasty yen-carry trade unwinding, prompting institutions to shed investments, including Bitcoin. Crypto markets, ever ready to respond to the faintest rustle, remain sensitive to rapid deleveraging, reflecting movements in broader financial theatres with the alacrity of a Shakespearean chorus. 🎭

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2025-11-21 10:36