Yamasaki: Yen Undervalued by Up to 20%, Warning Signs for Crypto Investors

Tatsuo Yamasaki, Japan's former Vice Finance Minister for International Affairs, warns that the yen is undervalued by up to 20%. According to Yamasaki, the fair value of the dollar-yen pair should be around 120-130 JPY, which is a far cry from its current price of 150 JPY. This means the yen is currently underpriced and could strengthen significantly in the coming months.

The yen carry trade, one of the largest shadow leverage systems globally, relies on cheap borrowing costs in Japan to fund investments in risk assets like Bitcoin. A stronger yen would squeeze these investors from both sides, making it more expensive for them to borrow and increasing their borrowing costs.

Historically, a weaker yen has coincided with increased flows into risk-on assets like Bitcoin. Yamasaki's warnings have a track record, as his previous commentary preceded Japan's September 2022 currency intervention. With the Bank of Japan projected to raise rates to 1% by mid-2026, tightening monetary policy and a stronger yen could create an environment where intervention is more likely.