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A Brief Discussion on Japan's Interest Rate Hike
Many people know that Japan's monetary policy meeting is tomorrow, and Japan may raise interest rates. However, most people just repeat what they hear or treat it as ordinary news, or they simply have no concept of Japan's interest rate hike. So, before the hike, let's talk a bit about Japan's interest rate hike and share some of my personal views and thoughts.
Actually, my regular followers know that I generally do not pay attention to news. But this time, Japan's interest rate hike is not an ordinary piece of news; it is on par with the news of the U.S. interest rate cut, and I believe its impact will be much greater than that of the U.S. rate cut!
All news events are most important the first and last time, and they are called the most important because they cause the greatest volatility. You can refer to the recent U.S. rate cuts to see if the impact has been diminishing with each event. Therefore, one thing is certain: if Japan raises interest rates this time, the volatility will be much greater than the volatility of the U.S. rate cut in December.
So how will Japan's interest rate hike affect the market?
To clarify in advance, if Japan does not raise interest rates tomorrow, it will likely hike rates in the coming months.
If the yen is to raise interest rates, it is very likely to reach 0.75%. If it reaches this rate, it will be something that hasn't happened in Japan for the past 30 years.
The consequences of Japan's last two interest rate hikes were actually quite dramatic. The first: The end of the internet bubble in 2000.
The second: The catalyst for the U.S. subprime mortgage crisis in 2008.
So what kind of chain reaction will occur at this stage?
Why can the yen cause such a violent reaction in the international financial market?
Mainly because the yen has long been at zero or negative interest rates. In other words, borrowing yen costs nothing. Many global institutions or investors will borrow yen and leverage it for investment and trading. Therefore, the carry trade with the yen will definitely incur higher costs as Japan raises interest rates, which will lead to the sell-off of gold, stocks, bonds, and cryptocurrencies. As for whether this sell-off will be extreme, I cannot say, but the previous two interest rate hikes in Japan acted as triggers for fear-induced sell-off events and black swan events, so you should pay attention to this.
In previous live broadcasts, I also told everyone that the current strategy is to hold your short positions because the bearish momentum on the daily chart has not yet been released.