[Finance] Bank of Japan Announces Interest Rate Hike, Will the Yen Return Home? Expert: AI Still Dominates Market Funds
bellala 央廣7h agoEdited
The Bank of Japan (BoJ) announced today (16th) that it will raise its benchmark interest rate by 25 basis points to 1%, the highest since 1995. In the past, when Japan raised interest rates, there was a large resurgence of overseas yen carry trade, triggering a chain reaction of sell-offs in global stock markets. Cathay Securities Chief Economist Lin Qi-chao stated today (16th) that judging by the yen's performance today, the appreciation is not significant, and it appears that AI still dominates market funds. #Please listen to reporter Chen Lin-xing-hong's report#
Japan has maintained zero interest rates for a long time. The vast number of retail investors, known as "Mrs. Watanabe," including Japanese housewives and individual investors, have taken advantage of Japan's low-interest rate environment to borrow yen, convert it into foreign currency, and invest in high-yield overseas assets.
In July 2024, when the Bank of Japan raised its interest rate to 0.25%, the yen appreciated by 7.5% in two weeks, causing the Nikkei index to plummet by 12.4% in a single day and triggering a chain reaction of sell-offs in global stock markets. The market is now highly concerned whether the Bank of Japan's interest rate hike this time will once again stir up a storm of asset repricing.
Cathay Securities Chief Economist Lin Qi-chao pointed out on the 16th that this interest rate hike by the Bank of Japan was expected, and the market has already reacted in advance. Furthermore, this rate hike is mainly to curb short-term inflation. After all, Japan's Producer Price Index (PPI) has exceeded 6%, which also makes the Bank of Japan worry that it will gradually be passed on to the consumer side. Import inflation has also begun to rise, and the Bank of Japan indeed needs to prepare for inflation through interest rate hikes.
Lin Qi-chao also pointed out that with this interest rate hike in Japan, the yen has not seen the significant appreciation that people imagined. After all, Japan's quantitative easing policy is expected to continue until after April next year, and it will still purchase 2 trillion yen in government bonds every month. The yen's fluctuations currently seem to follow the monetary policy of the US Federal Reserve. Regarding the possibility of a repeat of the "yen carry trade" storm, Lin Qi-chao believes that AI still dominates market funds at present. Lin Qi-chao said: "(Original sound) Looking at these countries, Taiwan and South Korea are the most obvious recipients of AI funds. Japan also has AI-related industries, including Kioxia, its largest company by market capitalization at over 320 billion US dollars. So, looking at the overall picture, AI is the main driver of the Japanese stock market this time, and it has less to do with monetary policy. It is more related to the momentum of AI capital funds."
Regarding whether the "sweet price" for Taiwanese people buying yen due to Japan's interest rate hike might come to an end, Lin Qi-chao believes that the current exchange rate of 5.08 yen per New Taiwan dollar is "very, very sweet." If international oil prices return to normal in the second half of the year and the US does not raise interest rates, the New Taiwan dollar and other Asian currencies still have room for slight appreciation, and the New Taiwan dollar and the yen may maintain such an exchange rate for a period of time. (Editor: Song Wan-yuan)
Source Link: https://www.rti.org.tw/news?uid=3&pid=214877
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