You guys need to hear this because the Bank of Japan just broke a cycle that lasted over three decades! After January 31 they raised their short-term lending rate to 0.25% and get this — it's the highest rate since February 8, 1994. That is thirty-one years of near-zero rates ending with one move. The G7 member has been on negative interest territory for so long that even a tiny hike like this feels massive because the previous ceiling was essentially zero. Ueda pushed through all nine policymakers unanimously and it's one of the rarest monetary policy shifts in modern history, given Japan fought deflation since 1990 and kept money dirt cheap to combat it.
The global ripple effect is already happening and you should watch this space closely over the coming months. The yen surged against both the dollar and the euro almost immediately as carry trades unwound — which is basically investors borrowing in low-interest Yen to fund higher-yielding investments elsewhere, now suddenly losing their hedge. Japanese equities were volatile all week, with Nikkei hitting a record low on Monday before bouncing back slightly by Friday's close. Ueda has already signaled more hikes could come this fiscal year, potentially another one by March or April if inflation stays around 2% and the Yen holds firm. This is much bigger than just Japan — it's the end of an era for cheap global borrowing that everyone from tech investors to your mortgageed neighbors should be tracking.
Source: https://www.bbc.com/news/articles/cjdgl213dpzo?at_medium=RSS&at_campaign=rss
The global ripple effect is already happening and you should watch this space closely over the coming months. The yen surged against both the dollar and the euro almost immediately as carry trades unwound — which is basically investors borrowing in low-interest Yen to fund higher-yielding investments elsewhere, now suddenly losing their hedge. Japanese equities were volatile all week, with Nikkei hitting a record low on Monday before bouncing back slightly by Friday's close. Ueda has already signaled more hikes could come this fiscal year, potentially another one by March or April if inflation stays around 2% and the Yen holds firm. This is much bigger than just Japan — it's the end of an era for cheap global borrowing that everyone from tech investors to your mortgageed neighbors should be tracking.
Source: https://www.bbc.com/news/articles/cjdgl213dpzo?at_medium=RSS&at_campaign=rss