Arthur Hayes, co-founder of cryptocurrency exchange BitMEX, raised concerns in December over rising Japanese government bond (JGB) yields, warning that the shift could reshape global capital flows and pressure U.S. financial markets.
According to Hayes, higher yields in Japan may trigger large-scale capital repatriation, drawing Japanese funds back home from overseas markets. This trend could significantly reduce demand for U.S. Treasuries, where Japanese institutions have long been among the largest foreign holders.
⚡️ INSIGHT: Arthur Hayes warns rising JGB yields could pull Japanese capital back home and reduce demand for US Treasuries. pic.twitter.com/vqJtfBytg0
— Cointelegraph (@Cointelegraph) January 21, 2026
Bank of Japan Policy Shift Sparks Yield Surge
Hayes’ warning follows a historic policy reversal by the Bank of Japan (BOJ). After nearly three decades of ultra-loose monetary policy, the BOJ ended large-scale stimulus measures and raised its policy interest rate to 0.75%. The central bank also scrapped its long-standing Yield Curve Control (YCC) framework.
As a result, Japanese government bond yields surged to multi-decade highs. The 10-year JGB yield climbed to 2.02%, while the 30-year yield reached 3.436%, which are levels not seen in decades.
This shift has increased the appeal of domestic bonds for Japanese institutional investors, who collectively hold approximately $1.1 trillion in U.S. Treasuries. With the interest rate gap between Japan and the U.S. narrowing, incentives to keep capital abroad are weakening.
Hayes argues that this dynamic could fundamentally alter global asset allocation, as Japanese investors reassess their exposure to foreign debt markets.
Risks for Crypto Markets and the U.S. Economy
The changing market structure is already affecting cryptocurrencies prices. Reports indicate that rising Japanese yields have fueled risk-off sentiment, pushing Bitcoin (BTC) briefly below $87,000 as investors reduced exposure to volatile assets.
Hayes cautioned that prolonged instability could increase the risk of a broader crypto market downturn if liquidity continues to tighten.
He also warned that reduced foreign demand for U.S. Treasuries could place additional pressure on U.S. bond markets. Hayes suggested that the U.S. 10-year Treasury yield could rise to between 5% and 6%, potentially triggering a localized financial crisis.
Higher volatility may lead to increased margin requirements, discouraging hedge funds and institutional players from absorbing bond supply further amplifying market stress.
Japan’s fiscal position adds another layer of risk. With government debt standing at approximately 230% of GDP, the highest among developed economies, rising interest rates significantly increase borrowing costs. Meanwhile, the Japanese yen has weakened to nearly 160 per USD, complicating the policy outlook.
As global macro risks intensify, investors are being urged to monitor bond markets closely and manage exposure carefully across both traditional and digital assets.
