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Japan’s new government plans to launch a stimulus package worth more than 17 trillion yen (or about $110 billion) to tackle rising prices and revive economic momentum. The move comes after the Japanese economy contracted by 1.8% annually during the third quarter of 2025, ending a six-quarter growth streak.
Analysts say the magnitude of the liquidity surge could put renewed pressure on the yen and direct capital toward risk assets, including Bitcoin (BTC).
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Japan’s economic recession is prompting a political response
According to Bloomberg, the economy contracted less than many economists expected. Expectations were for a decrease of 2.4%, so the actual decline of 1.8% was a little less severe. However, the negative growth signals a major reversal after 18 months of expansion.
“The Japanese economy was strong in the first half of this year and today’s GDP showed that the momentum is on pause. I hope that the Japanese economy will return to a moderate recovery trend in the future,” said Yoshimasa Maruyama, chief economist of SDASU Nikko Securities.
The contraction in GDP will provide Prime Minister Takaichi with additional support for his ambitious fiscal plans for a 17 trillion yen stimulus package.
“Japan is trying to help households absorb rising prices without forcing the central bank into a sudden shutdown, while at the same time financing industries that should anchor the next decade,” wrote one analyst. “Japan is the test case, and the United States is the audience. The side effects will tell us more about the next decade than the numbers of titles.”
However, this timing produces an unusual discrepancy: While the government prepares a major stimulus, the Bank of Japan remains prepared for a possible increase in interest rates. The BOJ kept the key interest rate at 0.5% at its last meeting in October.
Governor Ueda indicated that conditions may call for a rate increase from December. Such a combination can lead to… Currency fluctuations and transform capital flows at the global level.
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What does this mean for Bitcoin?
At the same time, market analysts expect the large injection of liquidity to weaken the yen. When governments increase the money supply, currencies often decline and investors look for alternatives to preserve value, especially those considered… A hedge against inflation.
Bitcoin often benefits from these movements. Digital currency attracts capital through… Periods of currency decline And monetary stimulus. Analysts note that liquidity often flows into risky assets before reaching the broader markets.
The timing coincides with a broader easing in global financial conditions. A market observer noted that in the United States, the The end of the government shutdownThe overall balance of the treasury account is close to $960 billion, and JP Morgan’s expectations that about $300 billion will come out of the general treasury account in the coming weeks, all point to an increase in the liquidity of the dollar. At the same time, the cycle slowed down Federal Reserve quantitative easing It is set to end on December 1st.
China adds to this scene by pumping more than Â¥1 trillion into its economy every week. Together, these developments suggest that global liquidity has become wider – a reversal of the tightness that occurred at the end of 2021.
The analyst argued that this environment increases the likelihood that Bitcoin’s recent weakness could be a trap for investorswith the asset potentially poised for a stronger move as liquidity expands globally.
The theory of the bull said : “This does not mean an immediate moon. Rather, it means that BTC is more likely to be trapped by investors, before the next possible movement begins.”
Time to come will reveal whether Japan’s deflation and stimulus package will lead to the expected rise of Bitcoin. As global liquidity changes, market participants will monitor traditional and digital indicators to spot the next big trend.
