The Japanese Bitcoin (BTC) market has witnessed a surge in volatility, tied closely to the recent instability of the Japanese Yen (JPY).

After decades of relative calm, the JPY entered a period of heightened fluctuations this year, influenced by the Bank of Japan (BoJ) shift in its monetary policy.

Accordingly, the 90-day volatility of the BTC/JPY trading pair surged in August. Analytic platform Kaiko noted that the BTC/JPY volatility even overtook that of BTC/USD, which is a record occurrence. Specifically, the event last occurred two years ago, in July 2022.

Consequently, this significant spike has caused Japanese traders to approach the crypto market with caution, significantly reducing trading volumes.

Factors Influencing BTC/JPY’s Record Volatility Spike

Notably, the sudden volatility in the Japanese Yen can be traced back to a series of monetary policy changes and external factors. First, the BoJ cut interest rates in August, driving the yen to a seven-month high.

However, those gains were short-lived. Dovish comments from newly appointed Prime Minister Shigeru Ishiba, alongside vital U.S. economic data and growing geopolitical tensions, contributed to the yen’s subsequent decline.

Japanese Crypto Market Takes Hit, Trading Volume Plummets by 50%

This yen instability has directly impacted Japan’s cryptocurrency market. Despite a global rally in the crypto market in September, trading volumes in the BTC/JPY market have been flat.

Specifically, the daily volumes on Japanese exchanges such as Bitflyer, Bitbank, and Coincheck stayed at around $200 million from August, which is half the average of $400 million observed between January and July.

Essentially, the uncertainty surrounding the yen has likely kept traders on the sidelines, making them reluctant to re-engage with the market.

On the other hand, trading volumes on U.S. and South Korean exchanges have increased during the same period. In particular, the sentiment turned more bullish in September, buoyed by improving macroeconomic data. The bullish sentiment is evident in the fact that Bitcoin traded as high as $66,480 in the last days of September.