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33 sats \ 9 replies \ @IamSINGLE 7 Aug \ on: BOJ Capitulating? econ
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.
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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.
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
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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
I'm counting on that ;-)
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