Japan's economy has recently been playing a seemingly contradictory storyline. On one hand, it announces that a fiscal surplus for the first time in 28 years is imminent; on the other hand, the central bank raises interest rates, which directly triggers a sharp decline in the yen, while also incorporating cryptocurrencies into the national wealth plan. Is this a policy mistake or a carefully planned strategic move?

**Fiscal Turnaround and the "National Endorsement" of Crypto Assets**

According to the Japanese government’s latest forecast, the basic fiscal surplus for the 2026 fiscal year is expected to reach 1.34 trillion yen, the first since 1998. Sounds promising, but the real highlight is the new crypto asset policy launched simultaneously. Japan officially confirms crypto assets as "financial products that contribute to the formation of citizens’ wealth." More substantively, the new tax system plans to implement separate taxation on gains from spot trading, derivatives, and ETFs, with tax rates significantly lower than traditional financial products. In other words, this is an official "stamp of approval" at the national level—aimed clearly at mobilizing private capital into the new crypto market track.

**Central Bank Rate Hike but Yen Plummets—What’s the Logic?**

This is the most perplexing part. The Bank of Japan has raised the policy interest rate to 0.75%, which under normal circumstances should support yen appreciation. But what happened? The yen depreciated to 157, while the Japanese stock market surged wildly. Behind this counterintuitive market behavior, there are actually three forces at play.

First, the market had already priced in the rate hike expectations in advance. The BOJ’s subsequent signals of "not being aggressive" instantly shattered the tightening expectations, causing the yen to fall.

Second—and most critically—the global supply chain restructuring driven by the Trump administration’s push for "de-Chinese-ization" is fundamentally changing capital flows. Japanese companies, in order to seize this opportunity, have to shift production to Southeast Asia, India, and other high-cost regions, creating a continuous demand for US dollars. This persistent dollar cash-out demand directly depresses the yen exchange rate.

Third, investors have already seen through the fact that Japanese government bonds still lack attractive yields, leading to a mass exodus from the bond market and a frantic inflow into stocks. The result is a bizarre "rising stocks, falling yen" scenario—Japanese stocks hitting new highs while the yen continues to depreciate.

**"Dual-Front" Strategy Amid Debt Crisis**

Piecing these fragments together, Japan’s deep-seated anxiety becomes apparent. With debt exceeding 260% of GDP and interest payments mounting each year, achieving a fiscal surplus under such constraints requires a different approach.

The benefits of a weak yen are obvious—in the context of the global "de-Chinese-ization" trend, cheaper Japanese goods and manufacturing capabilities become more competitive. Increased trade profits can directly ease debt pressures. Meanwhile, the new crypto tax regime not only opens up a new revenue stream but also guides private risk capital into this field through favorable policies. Essentially, this is cultivating the crypto market into a new wealth pool and economic growth engine.

In simple terms, Japan’s strategy is: leverage trade competitiveness to ease debt burdens, while treating the crypto market as a new growth engine. It’s a strategic breakout from the debt quagmire.

The question is, will this "fiscal + crypto" combo succeed? Will the yen continue to depreciate, even breaking through the 160 level? The market is clearly watching with anticipation.