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Isn't this just a little bit irrational? It's caused by the fact the bank of Japan put up their interest rate by 0.25% last week? The second rate hike in years

Isn't this just a little bit irrational? It's caused by the fact the bank of Japan put up their interest rate by 0.25% last week? The second rate hike in years. Japanese are extremely cautious and change isn't something they deal with on a frequent basis (Japan moves very slowly) so I think this freaked people out. I guess it might signal the end of the government prioritizing corporate profit over the well being of the populace, at least for a few years? Low interest rate, means the Yen would weaken further, which is great for major Japanese companies who deal heavily in exports. Any sign of this changing and it looks like investors run for the hills. What else could be the cause ?

voiceblue 2y ago
> Isn't this just a little bit irrational? Welcome to planet Earth. Hope you enjoy your stay. Leave us a review and don’t forget to fill out the survey!
- bamboozled 2y ago
  Fair play :)
deleted 2y ago
[deleted]
DarkmSparks 2y ago
Yen carry trade is unwinding, things could get very messy.
- tru3_power 2y ago
  I read a lot of reports stating that this trade is north of 20 trillion dollars. Do you know how this number is calculated? Or if it’s possible to identify other large risks like this? Seems pretty insane to me as someone not in finance.
  - DarkmSparks 2y ago
    most data you see in reporting likely comes out of a bloomberg terminal. https://www.bloomberg.com/professional/products/bloomberg-terminal/ https://www.bloomberg.com/professional/products/bloomberg-te...
frankharv 2y ago
Oh maybe being on the verge WW3 again might make businesses uptight.
- bamboozled 2y ago
  I don't think we're on the verge of WW3 because Iran and Russia are sucking at everything as usual. 5 days ago the BOJ upped their interest rates, and you think this is a coincidence or something to do with WW3?
rtpg 2y ago
> Japanese are extremely cautious and change isn't something they deal with on a frequent basis (Japan moves very slowly) so I think this freaked people out. I feel like if this is your level of analysis for the entire country you're not going to have that many insights beyond "interest rate movements matter more". There's a lot of economic difficulties right now in Japan due to high costs and a stubbornly weak yen. Of course it's dangerous to make quantitative arguments with qualitative facts, and it makes it hard to counterbalance the above with a statement like "the weak yen helps exporters". But if we're going off of vibes, a lot of people in Japan are struggling with worse buying power, downstream of an economy that needs to import a lot of raw materials... and that can cause pressure. And combining that with the tech news in the US... well... at least as a narrative there's a lot to say! I'd love to hear something more quantitative though. At the end of the day this all _might be_ vibes, but at one point the economy has to be somewhat linked to something a bit real, right?
- bamboozled 2y ago
  I've lived in Japan for a while now. Everyone understands a weak yen is a preference for major business here and that the government of Japan strongly prioritizes for major business happiness. There is almost zero concern for the populations economic prosperity and there is no political opposition. This isn't a "vibe" this is fact. If you go far back as the 90s economic collapse, most of it was ultimately caused by the mingling of politicians being executives of the banking sector and ultimately looking after their own interests. Rather than doing the right things to fix the situation then, the government did the wrong things. It's really sad but your average Japanese citizen has very little interest or idea about politics and policy and the population and the country suffers greatly because of this. Democracy isn't in their DNA, it was imposed. I will tell you though, the "vibe" here is, things aren't good, they just haven't worked out they're allowed to blame the government for poor monetary policy yet. Which IMO is what the government is starting to worry about. Personally, I don't think much will manifest from this, and Japan will just continue to slip backwards while the major corporations are taken care of. Vibes do matter when it comes to the share market, clearly.
  - bugglebeetle 2y ago
tru3_power 2y ago
From what I understand (and I may be completely wrong so please someone correct me) is that these rate hikes are causing the “carry trade” (estimated to be 20+ trillion dollars) to come to an end and investors are unwinding their positions fueled by these low borrowing rates- which is why we’re seeing US stock prices being dragged down as a result as well. (Investors borrowing yen at low value, investing in higher yield equities aka S&P500, and now owe yen at potentially higher than original cost, causing panic selling).
- panarky 2y ago
  Yes, hedge funds were selling (borrowing) yen which had positive carry, to fund purchase of US tech stocks. The carry is gone so now they're closing their positions, which means buying yen (which makes the yen stronger, which hurts Japanese exporters), while selling US tech stocks.
  - deepfriedchokes 2y ago
    I bet this is why Warren Buffett was freeing up cash.
  - RCitronsBroker 2y ago
    "One big bond market investor christened his yacht Positive Carry"
  - shiandow 2y ago
    I'm almost getting it but I feel like I need a step by step explanation. From what I understand the JPY had a low or negative interest rate which made it effectively 'free' or at least cheap to borrow funds in it. So am I correct that it was supposed to work like the following: - Borrow JPY at a low interest rate - Convert to USD - Buy stocks - Sell stocks (ideally with profit) - Convert to JPY - Pay back JPY loan (which had a low interest rate, leaving more profit) For this to work the JPY interest rate had to remain low and the yen had to remain cheap, both of which are now no longer certain which is exacerbated by investors cutting their losses en masse making the yen more expensive (and maybe increasing the effective interest rate as well?).
m3kw9 2y ago
The stock market is never rational. Even on the way up is irrational. Qqq down 10%+ already from highs so we gonna see some bounces
- bamboozled 2y ago
  Yeah I guess that's probably all I had to say :) I'd just really like to understand a bit more about it. I suppose my original comment was a little bit of a question too.
TheDong 2y ago
> might signal the end of the government prioritizing corporate profit over the well being of the populace Can you say more words about this? I've googled, and it looks like the Corporate Tax Rate for Japan (30%) is higher than the US (21%), and basically all the other developed countries (mostly around 25%), so from that it seems like it's prioritizing corporate profit less than other countries. My image of Japan is that it has well-functioning social services (healthcare and pension which are working, despite a largely aging population), that it has generally high standard of living and invests in infrastructure, and that corporate profits are quite low compared to other highly developed countries. It's also "common knowledge" (thought possibly wrong) that Japan's CEOs are paid less than those of, say, the US. In what way does the government prioritize corporate profits more than other governments?
- creakingstairs 2y ago
  Govt has been intentionally weakening yen (perhaps too much) so that big companies can export more thanks to cheaper prices. This also introduced inflation which would be fine if wage went up as well. But wage has remained stagnant while corporate profit / nikkei soared. It also doesn’t help that foreigners are flooding into the country while yelling “omg everything is so cheap!”
  - TheDong 2y ago
    My naive googling shows me that Japan imports more than it exports, so it would seem like a weak yen would reduce corporate profits too, so weakening the yen being proof that Japan prioritizes corporate profits more than other countries seems pretty weak to me. How has the government been intentionally weakening the yen? Zero interest rates? Was the US doing zero interest rates a ploy to weaken the dollar? Have they specifically said they're trying to weaken then yen? This really sounds like it's ascribing too much control and intention to the japanese government to me, when in reality hanlon's razor seems like it might apply to me
    - bamboozled 2y ago
      When you say Japan imports more than it exports, for who? Corporations? Because major Japanese corporations export, Toyota, Honda, Sony, Nintendo etc. We're talking about favorable conditions for corporations here. Personally, I didn't say the government is "intentionally" weakening the yen, but when the yen is weak, the people who "matter", don't complain or try improve the situation because it's good for exports. If the biggest companies in Japan are happy, I'm sure those who keep them happy are well looked after too. If you care about a poor old lady in her house, you wouldn't want to see the price of everything go up.
kkfx 2y ago
We are at the start of the III world war, that's the reason. Armament, foods will be the only keeping up or skyrocketing for some YEARS to come.
rrsp 2y ago
I think another explanation is that the Sahm rule came into an effect last week signalling a possible upcoming US recession.
incomingpain 2y ago
>Isn't this just a little bit irrational? Completely rational in my mind. >It's caused by the fact the bank of Japan put up their interest rate by 0.25% last week? The second rate hike in years. Certainly connected and related. They did the opposite of what they should be doing, but why didnt it crash in march? This is certainly not the whole story. Why would a 0.15% increase to bank rates in Japan cause all of crypto to crash the same? Also, why did lockheed martin just do a 52 week high? All rational.

voiceblue 2y ago

> Isn't this just a little bit irrational? Welcome to planet Earth. Hope you enjoy your stay. Leave us a review and don’t forget to fill out the survey!

bamboozled 2y ago
Fair play :)

deleted 2y ago

[deleted]

DarkmSparks 2y ago

Yen carry trade is unwinding, things could get very messy.

tru3_power 2y ago
I read a lot of reports stating that this trade is north of 20 trillion dollars. Do you know how this number is calculated? Or if it’s possible to identify other large risks like this? Seems pretty insane to me as someone not in finance.
- DarkmSparks 2y ago
  most data you see in reporting likely comes out of a bloomberg terminal. https://www.bloomberg.com/professional/products/bloomberg-terminal/ https://www.bloomberg.com/professional/products/bloomberg-te...

frankharv 2y ago

Oh maybe being on the verge WW3 again might make businesses uptight.

bamboozled 2y ago
I don't think we're on the verge of WW3 because Iran and Russia are sucking at everything as usual. 5 days ago the BOJ upped their interest rates, and you think this is a coincidence or something to do with WW3?

rtpg 2y ago

> Japanese are extremely cautious and change isn't something they deal with on a frequent basis (Japan moves very slowly) so I think this freaked people out. I feel like if this is your level of analysis for the entire country you're not going to have that many insights beyond "interest rate movements matter more". There's a lot of economic difficulties right now in Japan due to high costs and a stubbornly weak yen. Of course it's dangerous to make quantitative arguments with qualitative facts, and it makes it hard to counterbalance the above with a statement like "the weak yen helps exporters". But if we're going off of vibes, a lot of people in Japan are struggling with worse buying power, downstream of an economy that needs to import a lot of raw materials... and that can cause pressure. And combining that with the tech news in the US... well... at least as a narrative there's a lot to say! I'd love to hear something more quantitative though. At the end of the day this all _might be_ vibes, but at one point the economy has to be somewhat linked to something a bit real, right?

bamboozled 2y ago
I've lived in Japan for a while now. Everyone understands a weak yen is a preference for major business here and that the government of Japan strongly prioritizes for major business happiness. There is almost zero concern for the populations economic prosperity and there is no political opposition. This isn't a "vibe" this is fact. If you go far back as the 90s economic collapse, most of it was ultimately caused by the mingling of politicians being executives of the banking sector and ultimately looking after their own interests. Rather than doing the right things to fix the situation then, the government did the wrong things. It's really sad but your average Japanese citizen has very little interest or idea about politics and policy and the population and the country suffers greatly because of this. Democracy isn't in their DNA, it was imposed. I will tell you though, the "vibe" here is, things aren't good, they just haven't worked out they're allowed to blame the government for poor monetary policy yet. Which IMO is what the government is starting to worry about. Personally, I don't think much will manifest from this, and Japan will just continue to slip backwards while the major corporations are taken care of. Vibes do matter when it comes to the share market, clearly.
- bugglebeetle 2y ago

tru3_power 2y ago

From what I understand (and I may be completely wrong so please someone correct me) is that these rate hikes are causing the “carry trade” (estimated to be 20+ trillion dollars) to come to an end and investors are unwinding their positions fueled by these low borrowing rates- which is why we’re seeing US stock prices being dragged down as a result as well. (Investors borrowing yen at low value, investing in higher yield equities aka S&P500, and now owe yen at potentially higher than original cost, causing panic selling).

panarky 2y ago
Yes, hedge funds were selling (borrowing) yen which had positive carry, to fund purchase of US tech stocks. The carry is gone so now they're closing their positions, which means buying yen (which makes the yen stronger, which hurts Japanese exporters), while selling US tech stocks.
- deepfriedchokes 2y ago
  I bet this is why Warren Buffett was freeing up cash.
- RCitronsBroker 2y ago
  "One big bond market investor christened his yacht Positive Carry"
- shiandow 2y ago
  I'm almost getting it but I feel like I need a step by step explanation. From what I understand the JPY had a low or negative interest rate which made it effectively 'free' or at least cheap to borrow funds in it. So am I correct that it was supposed to work like the following: - Borrow JPY at a low interest rate - Convert to USD - Buy stocks - Sell stocks (ideally with profit) - Convert to JPY - Pay back JPY loan (which had a low interest rate, leaving more profit) For this to work the JPY interest rate had to remain low and the yen had to remain cheap, both of which are now no longer certain which is exacerbated by investors cutting their losses en masse making the yen more expensive (and maybe increasing the effective interest rate as well?).

m3kw9 2y ago

The stock market is never rational. Even on the way up is irrational. Qqq down 10%+ already from highs so we gonna see some bounces

bamboozled 2y ago
Yeah I guess that's probably all I had to say :) I'd just really like to understand a bit more about it. I suppose my original comment was a little bit of a question too.

TheDong 2y ago

> might signal the end of the government prioritizing corporate profit over the well being of the populace Can you say more words about this? I've googled, and it looks like the Corporate Tax Rate for Japan (30%) is higher than the US (21%), and basically all the other developed countries (mostly around 25%), so from that it seems like it's prioritizing corporate profit less than other countries. My image of Japan is that it has well-functioning social services (healthcare and pension which are working, despite a largely aging population), that it has generally high standard of living and invests in infrastructure, and that corporate profits are quite low compared to other highly developed countries. It's also "common knowledge" (thought possibly wrong) that Japan's CEOs are paid less than those of, say, the US. In what way does the government prioritize corporate profits more than other governments?

creakingstairs 2y ago
Govt has been intentionally weakening yen (perhaps too much) so that big companies can export more thanks to cheaper prices. This also introduced inflation which would be fine if wage went up as well. But wage has remained stagnant while corporate profit / nikkei soared. It also doesn’t help that foreigners are flooding into the country while yelling “omg everything is so cheap!”
- TheDong 2y ago
  My naive googling shows me that Japan imports more than it exports, so it would seem like a weak yen would reduce corporate profits too, so weakening the yen being proof that Japan prioritizes corporate profits more than other countries seems pretty weak to me. How has the government been intentionally weakening the yen? Zero interest rates? Was the US doing zero interest rates a ploy to weaken the dollar? Have they specifically said they're trying to weaken then yen? This really sounds like it's ascribing too much control and intention to the japanese government to me, when in reality hanlon's razor seems like it might apply to me
  - bamboozled 2y ago
    When you say Japan imports more than it exports, for who? Corporations? Because major Japanese corporations export, Toyota, Honda, Sony, Nintendo etc. We're talking about favorable conditions for corporations here. Personally, I didn't say the government is "intentionally" weakening the yen, but when the yen is weak, the people who "matter", don't complain or try improve the situation because it's good for exports. If the biggest companies in Japan are happy, I'm sure those who keep them happy are well looked after too. If you care about a poor old lady in her house, you wouldn't want to see the price of everything go up.

kkfx 2y ago

We are at the start of the III world war, that's the reason. Armament, foods will be the only keeping up or skyrocketing for some YEARS to come.

rrsp 2y ago

I think another explanation is that the Sahm rule came into an effect last week signalling a possible upcoming US recession.

incomingpain 2y ago

>Isn't this just a little bit irrational? Completely rational in my mind. >It's caused by the fact the bank of Japan put up their interest rate by 0.25% last week? The second rate hike in years. Certainly connected and related. They did the opposite of what they should be doing, but why didnt it crash in march? This is certainly not the whole story. Why would a 0.15% increase to bank rates in Japan cause all of crypto to crash the same? Also, why did lockheed martin just do a 52 week high? All rational.