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Recently, the proportion of the yen in the US dollar has been further increased, which has attracted widespread attention in the international community, and Japan is currently facing more severe economic challenges.
Against this backdrop, the Bank of Japan suddenly announced an interest rate hike, which is the first time in more than 10 years that such a policy has been adopted.
Over the past few years, the Bank of Japan has been adopting negative interest rate measures.
Now that the Bank of Japan has made this decision, there has been speculation that the value of the yen will inevitably rise in the future. However, the anomaly occurred that just a few days after the policy was introduced, the yen depreciated sharply.
At the same time, a large number of international capital has joined the ranks of shorting the yen.
Judging by the data released by professional institutions, hedge funds and asset management companies from all over the world began to liberate the yen shorts on a large scale.
This phenomenon has not been seen in the past 10 years, and the last time it happened was in 2008, when a severe global financial crisis was raging.
This time, many international capitals shorted the yen to a higher extent than the amount of the financial crisis that year.
In this context, the Federal Reserve, which had previously intended to cut interest rates, suddenly announced that it would continue to extend the time of interest rate cuts, and at the same time continue to promote the rise of the value of the dollar.
This move by the Fed has further exacerbated the magnitude of the yen's depreciation, causing more and more international capital to short the Japanese economy this time.
Due to the global influence and hegemony of the US dollar, every time the Fed implements a new policy, it will cause great turmoil in the global economic market.
Many countries have already been hit by the rise in the value of the US dollar, a phenomenon that is more common in some emerging countries. The exchange rate of emerging countries has fallen further due to the volatility of the US dollar.
As a result, capital from many countries has flocked to the United States, and Japan is no exception.
Judging by the data released by the Bank of Japan, a large amount of capital has begun to flee the Japanese market in recent times, and this capital has ended up in the United States.
The inflow of capital into the United States is actually playing into the hands of the Federal Reserve, because the Fed has launched interest rate hikes in order to attract the wealth of other countries.
In view of the current situation facing Japan, many people believe that the Bank of Japan should choose to continue raising interest rates in order to reduce the negative impact of the decline in the yen exchange rate.
So, what will be the impact if the Bank of Japan continues to raise interest rates?
Some analysts have made a comprehensive analysis of Japan's development in recent years, and from the perspective of Japan's development in recent years, every time the yen raises interest rates, it will have a negative impact.
Since the yen became a currency under the control of the dollar, there have been many negative effects if interest rates are raised, because Japan has a huge net worth in the world, and its size has become the largest in the world's foreign net assets.
Over the years, Japan has made significant investments in the mainland and is now the second largest investor in China.
In the case of rising yen interest rates, it will inevitably lead to the return of a large number of overseas assets, and then the original stock investors will suffer a heavy price, which will lead to a financial turmoil and collapse.
Under the influence of such a financial turmoil, the first to be affected is foreign exchange.
With the inflow of large amounts of capital into Japan's foreign exchange reserves, it is bound to be subject to great fluctuations.
The U.S. has already had a great impact on foreign exchange reserves as the U.S. continues to raise interest rates, and if Japan adopts the same policy, foreign exchange reserves will be further compressed.
In addition, there will inevitably be a large amount of repatriation of real estate stocks and various businesses, and it can be said that Japan's assets abroad are pervasive and involve a wide range of aspects.
Once the capital is withdrawn, the impact on the entire market is immeasurable. Under such circumstances, why did Japan choose to raise interest rates not long ago?
In this regard, analysts believe that Japan may actually cooperate with the United States in order to further create more foundation and conditions for the return of the US dollar and promote stronger liquidity of the US dollar.
If both currencies raise interest rates at the same time, the more countries that have a large influx of foreign capital, will eventually suffer a greater blow.
In addition, the rise of the yen exchange rate may cause turmoil in the global financial market, which will have a great impact on global monetary policy.
In addition, if interest rates rise, it will also have an impact on Japan's own economy, causing individuals and businesses to pay more interest when taking out loans, and it may also lead to a further reduction in the level of consumption of the people, and the impact on the retail industry cannot be ignored.
From a long-term perspective, if Japan chooses to raise interest rates in response to the decline in the yen's exchange rate, there is a risk that inflationary pressures will further expand.
What do you think about shorting the yen?