Tokyo’s stock market plunged on Monday, with the Nikkei index suffering its biggest point drop in history, sending most stock markets around the world into a tailspin.
The Tokyo stock market plunged on Monday, with the Nikkei index suffering its biggest point drop in history. motivated by an increase in the Bank of Japan (BoJ) interest rate. Last week this entity had raised its interest rates for the second time in 17 years and announced that he might do it again soon.
The decision to raise interest rates was a consequence of the rise in inflation, which went from being negative (-1%) in 2020 to exceeding 4% annually.. Rates had been in negative territory for 20 years. The Bank of Japan decided to raise them to 0% in March and to 0.25% in July.
This situation complicated the “carry trade” that certain speculative funds had generated: basically They took advantage of the very low rates in Japan, and with that money they invested in other countries such as the United States.
“The US unemployment data triggered an unwinding of yen carry positions, amplifying the moves. Many investors had leveraged this currency to buy American stocks, taking advantage of the low rates in Japan and a Japanese currency that continued to depreciate,” they explained from Facimex.
In parallel to the situation in Japan, it was announced on Friday that unemployment in the United States rose to 4.3% in July, from 4.1% in June. The data led the “Sahm Rule,” a long-standing indicator used by the Fed to predict recessions, to determine that a US recession was closer.
The collapse that began on the Japanese stock market dragged global stock markets down.
Source: Ambito
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