Japans economy is finally growing again after 30 lost years, JPMorgan Asset Management strategist David Lebovitz says. The escape from the Lost Decades is real, and crypto may end up paying for it.
The Lost Decades were Japans long slump after its 1990 bubble burst, when prices fell and rates stayed near zero. That cheap money quietly funded risk bets around the world, including crypto.
Timeline chart of BOJ policy rates from 1990 to 2026 against USD/JPY, Source: BeInCrypto
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Japan‘s Lost Decades Made the Yen the World’s Cheapest Money
Japans slump had one global side effect. The Bank of Japan (BOJ) held rates near zero from 1999. It even went negative in 2016 and stayed there until 2024.
That made the yen the cheapest money on Earth. Investors borrowed it for almost nothing and bought assets that paid more, from US bonds to tech stocks. Traders call this the yen carry trade.
Crypto grew up inside that easy-money era. So did every other risk asset.
Crypto Growth Trajectory
Japans recovery is now closing the tap.
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The Recovery Comes With a Bill
The good news is real. JPMorgan Asset Management global strategist David Lebovitz made the case in a televised interview. Japan is posting nominal growth, meaning growth in cash terms, for the first time in decades, he said.
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“Japanese economy is generating nominal growth for the first time in decades,” said.
However, growth brought inflation, and inflation crushed the yen. The currency hit a 40-year low near 164 per dollar in July. In real terms, it was the cheapest since the 1960s, the Council on Foreign Relations notes.
Japan and the U.S. spent $88 billion propping it up. The relief lasted two weeks before the rescue faded. The dollar is back near 159.50 yen.
US Treasury Secretary Scott Bessent says the real fix is higher Japanese rates. Markets agree and price another hike by October, Japans third in 12 months.
Voters are pushing the same way. Analyst account Bull Theory noted that 71% disapprove of Prime Minister Sanae Takaichis handling of living costs.
THE US IS PUSHING JAPAN TOWARD A DECISION THAT COULD BREAK ITS ECONOMY
US and Japan jointly intervened to support the yen, with Japan alone reportedly spending $88 billion.
It temporarily pushed the yen from nearly ¥164 to ¥155 per dollar. But it has already weakened back to…
Higher rates already sting at home. They sit at their highest since 1995, and Japans biggest insurers are nursing $96 billion in bond losses.
Crypto Has Seen This Squeeze Before
The last one was brutal. In July 2024, a surprise BOJ hike blew up the carry trade. The Bank for International Settlements (BIS) documented the shock in a bulletin. Bitcoin (BTC) fell about 25% in one week to near $49,000. Japans stock market had its worst day since 1987.
Bitcoin Price Performance on July 31, 2026. Source: TradingView
The trade survives because the rate gap is still wide. US rates sit at 3.50% to 3.75%, while Japans are at 1%. Every new hike makes cheap yen less cheap.
For now, markets are calm. Bitcoin trades near $64,700, little changed in 24 hours, per BeInCrypto Markets data.
Not everyone expects pain. BitMEX co-founder Arthur Hayes argues a Fed-backed yen defense could add liquidity and pump Bitcoin instead.
Japan waited 30 years for this recovery. Crypto is about to learn what defending it costs. The first answer comes at the BOJs September and October meetings.