Japan’s Debt Crisis Raises Crypto Appeal Amid Global Uncertainty – 17/9/2025
Rising concerns over Japan’s public debt could push investors toward alternative financial safe havens, including cryptocurrencies and stablecoins.
While global markets remain focused on the U.S., senior economist Robin Brooks of the Brookings Institution warns that Japan’s debt situation deserves close attention. According to Brooks, a potential U.S. recession may provide Japan with temporary relief, but structural debt risks remain acute.
Japan’s Debt-to-GDP Dilemma
Japan has long carried the highest debt-to-GDP ratio among advanced economies, consistently exceeding 200%. Post-COVID fiscal spending has only intensified investor scrutiny, especially as inflation, measured by the consumer price index, has surged to levels unseen since the 1980s.
Higher inflation has pushed government bond yields upward and increased borrowing costs, spotlighting Japan’s staggering debt-to-GDP ratio of roughly 240%. Brooks explained in a recent Substack post:
“Japan is in a terrible bind. Keeping rates low risks further Yen depreciation and uncontrolled inflation. Allowing yields to rise could threaten debt sustainability. This catch-22 brings a debt crisis much closer than most realize.”
Alternative Financial Channels
Growing debt concerns could drive interest in alternative assets. Stablecoins are emerging as one option, with Japanese startup JPYC planning to launch the first Yen-pegged stablecoin later this year.
The Yen has appreciated nearly 7% against the U.S. dollar this year, reaching 146.50 per USD, amid expectations of Fed rate cuts. Yet, since 2021, the currency has depreciated 41%, contributing to domestic inflation. Meanwhile, the 10-year Japanese bond yield has surged to 1.60%, the highest since 2008, reflecting heightened fiscal risk.
U.S. Recession Could Offer Temporary Relief
A U.S. recession, marked by consecutive GDP contractions, may drive global investors toward government bonds, lowering yields and providing Japan with a temporary reprieve. Brooks notes:
“U.S. and global yield declines could buy Japan time. Ultimately, though, the sustainable solution requires spending cuts or tax increases.”
The pressing question remains whether Japanese citizens will accept such measures—an answer only time can provide.
