The move comes as Prime Minister Sanae Takaichi attempts to jumpstart the world’s fourth-largest economy, but the package has triggered unexpected consequences across global markets—particularly for Bitcoin and other risk assets.
The stimulus announcement sent shockwaves through financial markets, pushing Japanese government bond yields to record highs and weakening the yen to multi-month lows. Meanwhile, Bitcoin continues its painful November correction, having dropped from October highs above $126,000 to around $86,000-$92,000, raising questions about whether the traditional relationship between yen weakness and crypto rallies still holds.
The Stimulus Package Breakdown
The Japanese cabinet structured the package around three main goals: fighting rising prices, building a stronger economy, and improving national defense. The total package of 21.3 trillion yen breaks down to 17.7 trillion yen ($112 billion) in general account spending and 2.7 trillion yen ($17 billion) in tax cuts.
Prime Minister Takaichi promised the package would boost Japan’s GDP by 24 trillion yen ($155 billion) annually—a 1.4% increase. The government plans to provide energy subsidies, lower gasoline taxes, and expand grants to local governments.
But the timing couldn’t be worse. Japan’s economy contracted 0.4% in the third quarter, the first decline in six months. Inflation hit 3% in October, staying above the Bank of Japan’s 2% target for 43 straight months. The country now faces a dangerous squeeze: inflation hurting consumers while economic growth stalls.
Yen Weakness Creates Market Chaos
The stimulus announcement accelerated the yen’s decline against the dollar. The USD/JPY exchange rate climbed to 157.56 on November 20, with the yen weakening 3.7% over the past month. More concerning, Japanese government bond yields surged to historic levels. According to market data, the 40-year yield hit 3.697% immediately after the stimulus announcement, then climbed further to 3.774% on Thursday, November 21—the highest since the security launched in 2007.
This creates a dangerous trap for Japan. According to analysts, every 100 basis points increase in bond yields adds roughly 2.8 trillion yen (approximately $18 billion) to the government’s yearly financing costs. With Japan’s national debt already triple the size of its economy, these rising borrowing costs threaten fiscal stability.
Source: @robin_j_brooks
Finance Minister Satsuki Katayama hinted at possible intervention, stating the government will take “appropriate action against disorderly [foreign exchange] moves.” But economists warn Japan faces impossible choices: raise interest rates and risk fiscal crisis, or keep rates low and watch the yen spiral downward.
Bitcoin’s Brutal November Correction
While Japanese markets struggled, Bitcoin experienced one of its worst corrections in years. The cryptocurrency briefly dropped below $90,000 this week, trading around $86,000-$92,000 range, extending a month-long decline that erased all of 2025’s gains. From its October peak of $126,000, Bitcoin has fallen nearly 30% in just 43 days—ranking among the steepest drawdowns since 2017.
The selloff intensified after strong U.S. jobs and inflation data on November 7-8 reduced expectations for Federal Reserve rate cuts. Markets now see only a 40% chance of a December rate cut, down from 78% probability in late October. Higher interest rates make borrowing more expensive and reduce appeal for speculative investments like cryptocurrency.
Bitcoin ETF outflows added to the selling pressure. Investors pulled $2.3 billion from U.S.-listed spot Bitcoin ETFs over five consecutive sessions, with BlackRock’s fund accounting for $532 million in withdrawals. Trading volume surged above $100 billion daily as the correction accelerated.
The Yen-Bitcoin Connection Breaks Down
Traditionally, a weak yen boosted Bitcoin and other risk assets. Traders would borrow yen at low interest rates and convert it to dollars to buy higher-yielding investments—a strategy called the yen carry trade. A declining yen made this trade more profitable, pushing money into assets like Bitcoin.
But this relationship appears to be breaking. Japan’s mounting fiscal problems have changed how markets view the yen. Bond yields and exchange rates no longer move together as expected, signaling that debt concerns now dominate market sentiment.
The Swiss franc is emerging as a more attractive alternative to the yen for carry trades. Switzerland’s benchmark rate sits at 0%, and its 10-year government bond yield hovers at just 0.09%—the lowest among developed economies. This shift means Bitcoin traders may need to watch Swiss franc movements rather than yen movements for risk appetite signals.
The $20 trillion yen carry trade faces serious pressure from rising Japanese bond yields. Historical data shows a 0.55 correlation between carry trade unwinding and S&P 500 declines. When yields rise and the yen strengthens, investors must sell foreign assets to repay yen loans—creating selling cascades across global markets.
What’s Next for Bitcoin and Risk Assets
Despite the brutal correction, some analysts see reasons for optimism. Bitcoin price models suggest an 18-22% gain could push BTC to $112,000-$118,000 by late November if macro conditions improve and ETF inflows return. Strong institutional demand remains, with many viewing the current dip as a healthy correction within a broader bull cycle.
Key technical support sits around $82,000-$84,000, where over 825,000 BTC were accumulated according to on-chain data. Bitcoin has been trading in the $86,000-$92,000 range in recent days. If support holds, Bitcoin could attempt recovery toward $100,000 before year-end. However, further weakness below $82,000 could trigger deeper declines toward $74,000-$77,000.
The Federal Reserve’s December meeting looms as a critical catalyst. Markets are pricing in only a 40% chance of rate cuts, but softer economic data could shift expectations quickly. Lower rates typically boost risk assets by increasing liquidity and reducing borrowing costs.
For Japan, the stimulus package may provide short-term relief but deepens long-term structural problems. The combination of record debt, aging population, and rising financing costs creates a sustainability crisis that monetary stimulus alone cannot solve.
The Bottom Line
Japan’s $135 billion stimulus gamble highlights the complex connections between global monetary policy, currency markets, and cryptocurrency valuations. The traditional yen-Bitcoin relationship appears broken, replaced by a new paradigm where fiscal concerns dominate currency movements.
Bitcoin’s November correction, with prices dropping from $126,000 to the $86,000-$92,000 range, ranks among its worst in years, but historical patterns suggest these drawdowns often precede major rallies. The question now: can Bitcoin hold key support levels while Japan navigates its fiscal tightrope? The answer will likely shape crypto markets heading into 2025.