This week we will discuss the change in policy by Bank of Japan and fresh concern in China over rising number of COVID cases and its potential impact of global supply chain and economic growth. Global economy which was returning to some path of certainty hit by another round of uncertainty.
Key points from Bank of Japan policy outcome
• Global inflation impacting Japanese inflation numbers.
• Change in policy allowing – allowing the yield curve to rise – will encourage capital to remain in Japan.
• Japan has been net exporter of capital since interest rate in Japan in negative, Japan has been source of cheap money globally.
• Japanese YEN has appreciated post policy outcome of Bank of Japan.
China ‘s COVID emergency
The situation in China continue to remain at alarming level as COVID spread continue to increase. News from China remains uncertain and selective for the world to understand the ground really very well.
Equichain Wealth Advisors: Market View & Opinion
We have seen term “Carry trade unwinding” where money is taken from BOJ at almost zero interest and invested in secured bond of developed countries, which is earning them risk-free return on their investment with currency risk which will hedge in forex market.
We believe, change in Japan ‘s monitory policy is a serious concern which could play out its impact in next 1 – 4 months as last source of cheap money which is Bank of Japan is now drying.