- The Bank of Japan will offer U.S. dollar funding via pooled collateral starting July 17 to ease pressure on domestic institutions.
- The BOJ move highlights tightening dollar funding conditions, particularly for Japanese firms engaged in USD carry trades amid a weakening yen.
- Bitcoin fell 1.3% to $118,371 as central bank liquidity actions raise concerns about risk asset resilience in tightening financial environments.
In a notable development that may mark the start of broader global monetary adjustments, the Bank of Japan (BOJ) announced a new dollar liquidity measure. According to Arthur Hayes, former BitMEX CEO, the move would be explored further during his upcoming presentation at WebX Tokyo on August 25, where he will examine how this policy may increase global fiat liquidity and impact Bitcoin.
The BOJ’s action—offering U.S. dollars against pooled collateral—is viewed by some analysts as a quiet yet significant intervention. Although not publicly positioned as a crisis response, the measure comes amid growing dollar funding pressure, particularly for Japanese institutions deeply involved in USD-denominated carry trades.
Japanese Institutions Face Pressure from Carry Trade Risks
Japanese banks have enjoyed a good streak for years on U.S. dollar carry trades, borrowing yen and investing in higher-yielding U.S. assets. It worked when the yen was stable and dollar liquidity was good. But with the continued U.S. rate hikes and a declining yen, hedging costs have dramatically increased. As a result, Japanese firms are now more exposed when they roll over their positions.
In this context, the BOJ’s measure aims to prevent a disorderly unwind of these trades by offering U.S. dollar funding within Japan. This step helps reduce pressure on Japanese banks and avoids potential disruptions in the broader Treasury market.
Rising Global Dollar Demand Signals Funding Tightness
The BOJ’s liquidity support may also reflect distress in dollar markets worldwide. Private funding conduits are becoming less efficient, so now central banks are stepping in as substitute conduits. Previously, such shifts have been accompanied by more widespread financial stress, as in 2008, 2011, and 2020.
The BOJ appears to be getting ahead of any potential market stress, particularly with a high proportion of dollar-denominated debt maturing in Asia over the course of the next two quarters. If the borrowers are not able to refinance at current levels, further moves by other central banks will then follow.
Bitcoin Price Slips Amid Macroeconomic Liquidity Developments
In parallel, Bitcoin (BTC) has declined by 1.3% in the past 24 hours, trading at $118,371. The current resistance sits at $119,862, while support is identified at $117,010. The move comes as macroeconomic events begin to influence digital assets, especially with shifts in global liquidity strategies.
Bitcoin remains within a narrow trading range, reflecting caution among market participants. Notably, the BOJ’s latest step may be early evidence of liquidity constraints spilling into risk asset markets. As dollar demand rises globally, these adjustments continue to shape asset behavior across regions.
