⚠️ATTENTION⚠️
THE FED CUT MAY WORSEN JAPAN'S SITUATION
Japan is ready for a RATE HIKE on Friday the 19th. Here are the NEW DATA we have, but first a recap of why it matters:
🔹The new Prime Minister rejects rate hikes, but the Bank of Japan made it clear its independence and now the 50 Bloomberg analysts expert in Japan expect a hike to 0.75%.
🔹Bloomberg reported that it was the first time under Ueda that the 50 surveyed economists agreed 100% on a HIKE for December... A CLEAR SIGNAL that this rate decision could already be priced in
🔹But the most delicate part is what comes next: the surveys see a final rate at 1.25%, meaning there could be 2 more increases in 2026
🔹So, one of the most important things on Friday will be the TONE of the President of the Bank of Japan and clues about future increases
Why does this shake the ENTIRE market⁉️
▫️Because Japan lent more than $20 TRILLION to the world at a 0% rate
▫️That money was used in the famous Carry Trade: taking debt in yen and buying more profitable assets like stocks, bonds, and crypto
▫️But if rates rise in Japan, the loan becomes more expensive
▫️Result: investors are forced to sell their assets to close positions or cover losses
▫️That massive selling creates a domino effect across the ENTIRE global market
📉We've seen this before: every time Japan raised the rate, there was a drop… but the bull market of #Bitcoin did NOT end.
🧠 But this time, another key factor is added:
🔸The FED cut the rate
🔸If Japan raises it now, it narrows the bond yield differential between the U.S. and Japan
🔸What happens then? It is no longer profitable to ask for yen to buy U.S. bonds
🔸This causes Japanese investors (the largest buyers of U.S. bonds) to repatriate capital
🔸How? By selling U.S. bonds, which drives up their yields
🔸And why does it matter? Because if U.S. bond yields rise, the cost of credit, mortgages, capital… increases and negatively impacts liquidity
👉BUT PAY ATTENTION TO THIS:
▫️Reuters survey of 70 economists: 90% of them say it's already priced in
▫️The Japanese BANK Nomura believes that the decision is priced in at 98% and will have a moderate impact
▫️HSBC BANK states that the INTEREST RATE INCREASE is “widely discounted” and focuses on the FED's problem
▫️Goldman Sachs claims that the INTEREST RATE INCREASE is priced in and what will matter are the FUTURE PROJECTIONS
👀This may be due to the fact that we already had a drop on December 1 when the President of the Bank of Japan signaled that a rate increase would occur
👀This brought Japanese bond yields to their highest level since 2008...
👀The impact may be MUCH LOWER than in previous scenarios
📍According to JPMorgan, 75% of the carry trade has already been dismantled…
📍But a single rise + projections of more increases could spark a new wave of forced selling
