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Interest rate hikes met with "bloodbath"! The yen plummets past 157, and the U.S. sets a trap for Japan! 一起聊聊！
Who would have thought? The Bank of Japan's most aggressive interest rate hike in 30 years has become an "accelerator" for yen depreciation! On December 19, Japan raised interest rates by 25 basis points to 0.75%, intending to turn the tide, but the dollar-yen exchange rate soared directly to 157.76. The euro and pound against the yen even hit historical highs, leaving the market dumbfounded by this "reverse operation".
The core issue is simple: the pace of interest rate cuts in the U.S. has completely disrupted Japan's calculations. The Federal Reserve has already entered a rate-cutting cycle, with current rates still above 3%, and the huge interest rate differential of 5% between the U.S. and Japan means that the "carry trade of borrowing yen to buy dollar assets" continues to be highly profitable. The market sees through it all: the 25 basis point interest rate hike is merely "scratching the surface," and the yen remains the cheapest financing currency globally, making the selling spree unstoppable.
Even more critically, Japan has its own hard issues: GDP contracted by 2.3%, government debt is high, and core CPI has exceeded 2% for 44 consecutive months, falling into a dilemma of "stagflation." Bank of Japan Governor Kazuo Ueda's vague statements only say that "the door for tightening is open" without providing a specific timetable, causing the market to lose all confidence. As economists say, this isn't about "applying the brakes"; it's just about "loosening the accelerator," and the easing tone hasn't changed at all.
The finance minister is calling for intervention in the exchange rate but fails to come up with any real measures, leading the market to speculate that Japan intends to devalue the yen to stimulate exports. Today, the yen's status as a safe haven is shaky, and the carry trade has shifted from "risk-free arbitrage" to "high-risk speculation," but the outflow of capital cannot be stopped.
When will this currency storm come to a halt? Will the yen break below 160 and set new records? Will the Bank of Japan be forced into aggressive rate hikes in the future?
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