BOJ definitely trying to jawbone the market after a few extremely volatile sessions for the Nikkei.
"We won't raise interest rates when financial markets are unstable," Uchida said.
https://ca.finance.yahoo.com/news/boj-wont-raise-rates-markets-015607695.html
I hope BOJ gets over the mess, otherwise the situation in other markets will also be worse.
However, I agree that BOJ has had chances before but now they can only jawbone. 99.9% chances of deep recession in Japan is confirmed!
What does jawbone mean?
attempt to persuade or pressure by the force of one's position of authority.
blackmail or coercion lol
Thats how i interpret jawbone - trying to influence through words rather than do anything substantial
In a financial or political context, jawboning is a form of persuasion.
I don't think BOJ will capitulate now. It will have a last run before doing that.
I don't know. That rate increase was dramatic considering BOJ policy over the last 35 years. To have raised rates while the economy was slowing could even be seen as reckless. I don't see this as jawboning, using the definition of talking rather than having to act to accomplish your goals. In fact, I think the next rate move is down.
Agree with you that the next move will be lower but they are trying to save face by talking the market off a ledge and not having to do an emergency cut a week after they raised. That’s my interpretation of the situation.
I agree. A move now would just cause panic.
Raising rates only matters if people have debt and loans.
Isn’t total household debt trivial in Japan especially compared to USA and Europe?
Lower rates are supposed to stimulate investment. Japan sees to be inelastic in this regard since 1990.
It was also irresponsible to keep rates at zero or negative for 35 years
Get out your ai and search Yen Carry Trade. This is what's been happening for 35 years, and you'll see why raising rates turned everything upside down.
Oh damn! Of course!
How do I borrow yen?
How can this arbitrage exist for 30 years?
Perplexity:
The yen carry trade is a financial strategy where investors borrow Japanese yen at low interest rates and invest in higher-yielding assets elsewhere, such as U.S. stocks or bonds. This trade relies on stable exchange rates and low borrowing costs in Japan. Recently, the strategy faced challenges as the yen appreciated due to rising Japanese interest rates, making it more expensive to repay yen-denominated loans. This led to a market sell-off as investors rushed to exit positions, contributing to significant market volatility[1][2][5].
Sources [1] Explainer: What is the yen carry trade? - Reuters https://www.reuters.com/markets/asia/what-is-yen-carry-trade-2024-08-07/ [2] A popular trading strategy just blew up in investors' faces - CNN https://www.cnn.com/2024/08/07/business/yen-carry-trade-stocks-nightcap/index.html [3] What Is the Japanese Yen Carry Trade? - WSJ https://www.wsj.com/finance/currencies/what-is-the-yen-carry-trade-e5ab9670 [4] What to Know About the Japanese Yen 'Carry Trade' That ... - Barron's https://www.barrons.com/articles/japan-yen-carry-trade-explained-stock-market-crash-cc6ac7ea [5] What are carry trades and how did they contribute to this week's ... https://apnews.com/article/stocks-markets-carry-japan-currency-9611229d14e547e11f7e0299f2a6d00a
You know, that's a very clear, damn good explanation.
plus footnotes and citations!
Edit: I didn't realize the double whammy: higher interest rates plus a stronger yen. That is insult and injury!
I'm counting on that ;-)
Unstable is what they caused by letting the carry trade to become so big. The correction should be healthy, Not unstable.
All Banks, except a few here and there, worldwide are in a situation where things are getting out of control. For Japan, what else we can get now?
IMO. I think that everything that happened with Japan is just noise, to be able to knock down the price and do what always happens, clean out the weak hands, for the big market participants to put their orders together because everything was also at its highest levels for months: BTC, S&P, NDX, XAU
Maybe they want to toe the line and see how it works out?
They are definitely pausing further rate hike plans but we will see if they full on capitulate.
Holding steady while everyone else cuts rates is similar to raising them yourself.
Well, I think they are thinking less is more at the moment. They did have a freefall on the yen, and the nikkei index.
I agree. It's sort of a two birds one stone situation.
For the moment, until another crisis takes off. Just give it a couple of weeks.
"The recent strengthening of the yen would affect the BOJ's policy decision because it reduces upward pressure on import prices, and therefore overall inflation." They just dont want to ruin a good thing. Now that the yen has "strengthened".
Inflexible corporate policies are in fashion these days
Yep it is badly trying to market
Capitulating - but capitulating in which direction? The exchange rate is currently doing doing the opposite of what it did for the last months. So in which direction?
I hope boj won't mess up