The surge in Japan's two-year government bond yield to its highest level in over 31 years on Monday signals increased costs for the yen carry trade, which has historically funded global risk assets like Bitcoin. Swap markets now price an 88% chance of a Bank of Japan rate hike in September. Despite the BOJ raising its policy rate to 1% in June, the yen has weakened, trading at 160.20 per dollar on Monday. The spread between US and Japanese two-year yields has narrowed to 2.64%, reducing the carry incentive. This divergence suggests a confidence problem in Japanese bonds, with past instances like August 2024 showing Bitcoin and Ethereum losing up to 20% as yen-funded positions unwound.