Impact of Japan’s Fifth Largest Bank Crisis on Bitcoin
BitMEX co-founder Arthur Hayes recently stated that the Japanese banking system is on the brink of a significant crisis, which could lead to another surge in Bitcoin (BTC) and the cryptocurrency market. Hayes believes that Japanese banks, burdened with substantial amounts of underwater U.S. government bonds, will soon require large-scale bailouts similar to what U.S. banks faced in March 2023.
Recently, Japan’s fifth-largest bank, Norinchukin Bank, announced plans to sell $63 billion in U.S. and European bonds by March 2025 due to unbearable book losses on these assets. Hayes sees this as just the tip of the iceberg, pointing out that, according to an International Monetary Fund (IMF) survey, Japanese banks held $850 billion in foreign bonds as of early 2022, including nearly $450 billion in U.S. bonds.
Arthur Hayes warns that Japanese banks are facing severe financial problems due to massive losses on U.S. government bonds. He compares this situation to last year’s crisis in the U.S. banking sector. At that time, Silicon Valley Bank disclosed $1.8 billion in losses on underwater bonds, prompting swift intervention by the Federal Reserve and the U.S. Treasury. To prevent the collapse of the banking system, the Federal Reserve promised to fully support any U.S. Treasuries held by American banks.
Hayes further suggests that such a large-scale bond sale would be unacceptable to U.S. Treasury Secretary Janet Yellen, as it would cause bond yields to skyrocket, making federal funding exceedingly expensive. He predicts that Yellen will ask the Bank of Japan to buy these bonds from Japanese banks. To facilitate this, Hayes recommends that the Bank of Japan use its Foreign and International Monetary Authorities (FIMA) repurchase agreement tool, allowing it to swap U.S. Treasuries for newly printed dollars.
Hayes believes that this situation will lead to increased money printing, benefiting those who hold assets like Bitcoin. Consequently, he plans to shift from Ethereum stablecoins to “crypto risk” and advises others to “buy the dip.” He sees this as a crucial driver of the current crypto bull market, asserting that the supply of dollars must increase to sustain the current dollar-based financial system.
In summary, the crisis in Japan’s banking sector, particularly involving major institutions like Norinchukin Bank, is seen by Arthur Hayes as a potential catalyst for significant growth in the cryptocurrency market, particularly Bitcoin. The expected response involving increased money printing and bond purchases by the Bank of Japan is anticipated to favor assets like Bitcoin, leading to a bullish market trend.
