Part 5/10:
A rise in Japanese interest rates strengthens the yen against the US dollar. This appreciation increases the yen value in dollar terms, creating margin calls for hedge funds that borrowed yen to purchase assets. To cover these calls, they liquidate holdings—often starting with Bitcoin because of its high liquidity and 24/7 trading hours.
Simultaneously, Japan is the world's largest foreign holder of US Treasuries, holding over $1.1 trillion. If domestic yields rise, Japanese investors could sell US bonds and bring their capital home, leading to upward pressure on US yields. Rising yields in the US threaten risk assets like tech stocks and cryptocurrencies, creating a double whammy.