Japan’s Debt Crisis Spurs Interest in Crypto and Stablecoins – 17/9/2025
Japan’s escalating debt challenges could drive investors toward alternative financial assets such as cryptocurrencies and stablecoins. While global attention has largely focused on the U.S., senior economist Robin Brooks of the Brookings Institution warns that Japan’s fiscal risks are mounting. A potential U.S. recession may offer temporary relief, but structural debt issues remain a major concern.
Debt-to-GDP Pressures Mount
Japan holds the highest public debt-to-GDP ratio among advanced economies, consistently above 200%. Post-pandemic fiscal spending, coupled with sticky inflation reaching levels not seen since the 1980s, has intensified investor scrutiny. Rising consumer prices have pushed government bond yields higher, making new borrowing more costly and spotlighting Japan’s debt load of roughly 240% of GDP.
Brooks explained:
“Low interest rates risk further Yen depreciation and uncontrolled inflation, while higher yields threaten debt sustainability. Japan faces a catch-22, bringing a debt crisis closer than most realize.”
Stablecoins and Crypto as Alternatives
Investor interest in alternative financial instruments is growing. Japanese startup JPYC plans to launch the first Yen-pegged stablecoin later this year. While the Yen has strengthened nearly 7% against the U.S. dollar this year, it has depreciated 41% since 2021, fueling domestic inflation. Meanwhile, Japanese government bond yields are at multi-decade highs, reflecting rising fiscal risks.
Temporary Relief from U.S. Recession
A U.S. recession could push global investors toward government bonds, lowering yields and buying Japan time. Brooks noted:
“Lower yields may provide temporary relief, but the only long-term solution is for Japan to reduce spending or raise taxes.”
The key question remains whether Japanese citizens will accept these fiscal measures, a decision that will shape the country’s economic trajectory.
