HomeEconomyAnalysis - 10,000 reasons why the Bank of Japan is worried about... Economy Analysis – 10,000 reasons why the Bank of Japan is worried about the Fed By inew September 21, 2022 0 95 views Share FacebookTwitterPinterestWhatsApp BAC -1.% Add to Watchlist/Remove from Watchlist Add to Watchlist Add Location Job added successfully: Please name your portfolio type:purchase Sell date: quantity: price Point value: Leverage: 1:1 1: 1: 1: 1: 1: 60 1: 23 1: 50 1: 144 Committee: 2006 create new watchlist create 1998 Add Create 2007 + Add another position to close STT -2.% 1998 Add to Watchlist/Remove from Watchlist Add to watch list Add Location Job added successfully: Please name your portfolio type: purchase Sell date: quantity: price Point value: Leverage: 1:1 1: Kevin Buckland and Vidya Langanathan SINGAPORE (Reuters) – Japanese families idle 10 billion yen, ready to be shipped overseas when foreign yields become more attractive, a moment that could come as early as this week. Later on Wednesday, the Fed will raise interest rates again by as much as a full percentage point. The next day, the Bank of Japan is sure to cement its position as the only global dovish in developed markets by sticking to negative rates. The yield differential between the two markets will take a hit 25 Basis point (bps): Analysts say this is an inflection point that will prompt Mrs. Watanabe, nicknamed a well-known Japanese retail trader, to ditch the yen and move money out. ” In terms of pure FX arbitrage, USD will soon offer 3%, JPY is still 0%, so that’s a big difference,” said Shusuke Yamada, chief foreign exchange and rates strategist at Bank of America. BAC ) in Tokyo. That yield has incentivized institutional and retail investors to buy and hold dollars, he said. “Japanese households have one thousand trillion yen in deposits. I don’t think it moves 1% per year, but even 0.1% is It’s already a trillion, so even a small fraction could have a meaningful impact. There’s that potential,” Yamada said. A blow to the already battered yen, which has fallen This year’s percentage against the dollar should be of concern to the Bank of Japan. During the pandemic, as central banks push interest rates to zero, compressing spreads between currencies and strangling Widespread, yield-seeking Japanese households are noticeably absent from yen-funded “carry” trades in global currency markets. But household savings in the world’s largest creditor nation have been rising. As of June, households have 1,25 trillion yen ($7.7 trillion) in cash and deposits, while private non-financial corporations own 60 trillion yen. “There is a risk of capital flight from Japanese households,” said Tohru Sasaki, head of Japan market research at JPMorgan Securities in Tokyo. “We’ve been talking about it for a long time – over a decade in fact – but it never happened. But I think the current situation is really different. “Generations are shifting, technology is advancing, and things are getting worse in Japan, so the odds are getting higher r seeing a capital flight. “ “become scary” Citi’s quant analyst strategist Alex Saunders said the carry trade in major currencies has not worked since then 300 As all interest rates tend to zero, although this year They’ve recovered, but he doesn’t see much of that happening with the yen. This may change. Sasaki points out that Japan People feel more deeply that they are gradually losing purchasing power when the currency is so weak, while pointing out how easy it has become for even the elderly to buy foreign currency with a smartphone. He also highlighted recent developments such as the oil-fueled rapid expansion of Japan’s trade balance to a record deficit and the unprecedented weakness in the yen’s real exchange rate. “Now the yields are starting to expand and people are starting to gradually move their money abroad. Basically regardless of the level, there is a feeling that we need to hold some foreign currency or we need to hold the dollar to avoid the risk of a weakening yen,” Sasaki said. “That’s why I’m a little scared seeing this. This time may be different…so dangerous. ” exist102 bps, dollar “arbitrage” funded by yen close to Last Level -300 The crazy overseas investment of Japanese retail investors, while the previous 71-300.Any reduction will not compensate for the risk, although a weaker yen is a benefit. January 300, when the spread between the U.S. and Japan was at its greatest was about 71 bps , Japanese families have 1,150 trillion yen in assets. By June, that number had shrunk .5 trillion yen. “Even if the exchange rate doesn’t change, if you have this yield spread, you’re going to benefit from it,” Takuya Kanda said, head of research at Gaitame.com Research Institute, which mainly serves retail investors. “So, especially this week, it looks like the BOJ is going to keep interest rates extremely low, and really only Japan is still in negative territory right now, It’s a very favorable environment for capital to flow overseas.” A survey of Gaitame.com customers in August , about% for USD – The yen will continue to climb many people predict it will rise to 22, He says. On Wednesday, it just closed 25. Bart Wakabayashi, Branch Manager 300 State Street (NYSE: 631 STT ) said in Tokyo that the typical Japanese retail trader likes to roll over foreign currency holdings of Japanese yen funds on a daily basis to earn interest, but sometimes also foreign currency gains And play, which makes them more willing to take risks that institutions cannot. This makes the Bank of Japan have to work hard to put an end to the speculation of a one-way downside of the yen l bet that it has reporting and monitoring of the yen level. “This BOJ is trying to change that conversation. People are saying 50 is a line in the sand. I don’t believe it,” Wakabayashi said. “I think23 is OK. I think 25 was our trigger from stage 2, official reviews, to stage 3, critical warnings.” 1998 Share FacebookTwitterPinterestWhatsApp Previous articleColumn-Dazed and confused enough to buy bonds: Mike DolanNext articleSpy × Family GN 8 inewhttps://inew.news RELATED ARTICLES Economy Boris Johnson hands COVID-era WhatsApps to UK government amid inquiry row May 31, 2023 Economy Without action on jobs, low-income countries will fall behind – ILO May 31, 2023 Economy China VC funding set for weakest first half in 8 years May 31, 2023 LEAVE A REPLY Cancel reply Comment: Please enter your comment! Name:* Please enter your name here Email:* You have entered an incorrect email address! Please enter your email address here Website: Save my name, email, and website in this browser for the next time I comment. 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