On July 15, 2025, the Bank of Japan (BOJ) quietly announced that it would begin supplying U.S. dollar funds against pooled collateral, starting on July 17, a move that might seem like standard liquidity management.
However, according to macro analyst EndGame Macro, this technical maneuver may signal the beginning of a far deeper shift, hinting at growing stress inside the global dollar funding ecosystem and the cumulative strain of Federal Reserve Chair Jerome Powell’s persistent hawkishness.
The carry trade squeeze and systemic pressure
EndGame Macro explains that, for years, Japanese institutions profited from USD carry trades: borrowing cheaply in yen, investing in higher-yielding U.S. assets, and hedging the currency risk. This trade thrived on historically easy dollar liquidity and a strong yen. Now, with the dollar buoyed by high Fed rates and the yen slumping, the economics are breaking down.
As the cost and risk of rolling over these trades escalate, Japanese firms face mounting pressure. The BOJ’s action of supplying domestic USD liquidity is less about the current crisis and more about “preemptive firefighting.”
The maneuver also points to a broader global problem: dollar scarcity. When a major central bank intervenes to provide USD locally, it’s a clear message that private markets are slipping in their capacity to allocate dollars efficiently and cost-effectively. We’ve seen the early signs before, he states, most notably in 2008, 2011, 2019, and 2020, which led to repo market ruptures and emergency Fed interventions.
Arthur Hayes, former CEO of BitMEX, commented on the implications of these central bank machinations, pointing out that such moves bolster global liquidity:
“This is huge… The BOJ is about to ramp up the fiat liquidity gusher and propel $BTC much higher.”
The BOJ rate hike and crypto assets
CryptoSlate recently reported that the BOJ’s recent rate hike to 0.5%, the highest since 2008, sent shockwaves through both Japanese and international markets, including a 22% drop in Metaplanet shares.
The move, prompted by persistent inflation above 3%, has put pressure on previously steady carry trades and heightened volatility across assets. Higher Japanese rates narrow the profitability of borrowing in yen to invest overseas. Unwinding these trades can cause rapid capital flight from risk assets, including cryptocurrencies, increasing global volatility.
When the dollar becomes more expensive and less available globally, riskier assets, like Bitcoin, often face pressure, with price surges or sudden downturns as liquidity dynamics shift. However, if central banks, including the Fed and BOJ, coordinate or expand liquidity (e.g., via swap lines or renewed QE), risk assets like crypto can rebound sharply, as Hayes anticipates.
The BOJ’s recent steps, both in lifting rates and preemptively adding USD liquidity, are more than routine tweaks. As EndGame Macro states:
“Quiet moves like this one are often the first signs.”
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