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).

This matches my understanding. An article explaining this a bit.

Things are not looking good right now. Korean markets already hit the circuit breakers tonight.

https://www.reuters.com/markets/currencies/boj-shift-gives-y....

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.

I bet this is why Warren Buffett was freeing up cash.

"One big bond market investor christened his yacht Positive Carry"

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?).

> 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?

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!”

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

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.

> Isn't this just a little bit irrational?

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Fair play :)

> 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?

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.

> Democracy isn't in their DNA, it was imposed.

this is an aside but the 1889 constitution had democractic components. Turns out a military coup stops democratic progress for a while. Japanese popular participation in politics has a lot of dimensions to it, including popular uprisings and authoritarian pushback by the government (including post-1945)

I've also lived in Japan for a while, and I've always found any sort of argument around the different nature of Japan based in "people be different" to be unsatisfying.

Usually you can dig just a bit more and find very straightforward material explanations for people's behavior. Or even at worst the same kind of behavior you see everywhere, just shifted around in intensity a little. Maybe this is too nihilistic but sometimes there are less magical explanations (like not caring about interest rates being downstream of them being near 0 percent)

I don't really understand this statement ,can you clarify?

I've also lived in Japan for a while, and I've always found any sort of argument around the different nature of Japan based in "people be different" to be unsatisfying.

I would say that your analysis seems to be based on tropes about Japanese people that are familiar to me as someone who has never visited Japan. I can't speak to the accuracy of your analysis, but for this reason it is not very satisfying. You don't get the kind of "aha!" moment that you might expect to get from an analysis based on a deep familiarity with Japanese culture, history and politics.

I'd say this level of push back is fairly common. People don't want to believe society here actually works differently. But there is a strong culture in Japan which I don't think you can just experience by being on holidays. Some of the stories I tell people are hard to believe.

I'll give you a simple real world example. The other day I left my wallet in a bag on a towel rack at the gym, my wallet was visible.

I was mid workout and I didn't want to go back to get it. Honestly, knowing Japan well enough, I just left it there , and sure enough, when I got back, it was still there, not a single dime taken. Thieves exist here, but they're the exception, not the rule.

I would never do this in any other country. Tell me that's familiar to anyone living in the US.

I mean it's familiar in the sense that it conforms to well-known cultural tropes about Japan. I'm not saying that all of these tropes are necessarily inaccurate, only that they're so well known that an analysis based solely on them feels a bit slapdash (even if it might still be correct). Japan is widely known as being a society with low crime, high trust, etc. etc. This isn't something only known by people who've lived in Japan for extended periods.

So no, I'm not at all surprised by your story about the wallet, and I don't think most people would be. (To be honest I wouldn't be surprised if the same thing happened in the US either – it's not like everyone in the US is a criminal and all unattended wallets reliably get stolen.)

These aren't "tropes" they are real aspects of the culture. These cultural features do have an effect on how democracy works in Japan and how the government perceives and responds to the public reaction to certain events, especially in regards to the economy. I have not heard a single, not a single person say the administrators of the country are doing a bad job which is why we're in this mess, no, they just seem to talk like there is some external, mysterious force causing these issues. Now maybe people are thinking differently, but when it comes to the democratic process, the public discourse is important and it's lacking.

I have personally only heard one, I repeat one person criticize a politician in my entire time being here, can you believe that? He was a politician himself :)

The only other time I remember there being some suspicion about politics was after Abe's assassination, there was some conspiracies going around about how Korea is running the government because of his affiliations with a Korean cult. Even then, everything I heard was radically civil.

If this stock market and currency collapse was in the USA, you could imagine the discourse around it right?

I'm sorry but there is a real stark difference between cultures and the effect it has on the democratic process and therefore the urgency in which a government would react to negative public opinion. In this case, In Japan the government is almost always siding with big business, because why not? What will happen? The LDP will be removed?

The government in Japan is practically authoritarian at this point, they have no opposition, they're not going to adapt very quickly for the sake of worrying about the polls. Also worth reading about is Japan's "online defamation laws" which are also pretty dystopian in my opinion.

>These aren't "tropes" they are real aspects of the culture.

These are not mutually exclusive categories.

>I wouldn't be surprised if the same thing happened in the US either

I would. There's not even any cash in my wallet and I was pickpocketd in broad daylight (I'm not exactly exuding "rich dude" so I'm an odd target). I'm just lucky I had an apple tag in it and the thief ditched it in the bathroom when they assumedly saw it (before I activated it).

Even if there was nothing in the wallet, I wouldn't be surprised if my unattended wallet was shuffled, drop, and probably dripping wet when I came back. Part of why I switched to a metal one, actually.

> 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.

Japan has been an effectively ”managed” democracy for the entirety of the postwar period, so I find this argument to be unconvincing. In the postwar period, the ruling LDP party was assembled by U.S. intelligence services from a mix of war criminals and far right business leaders and funneled millions of dollars and provided other forms of support for decades. There was widespread unrest as a result of this up until the early 70s, where the tensions around America’s use of the country as a FOB for the Vietnam War came to a boil and state police and security services engaged in widespread violence and crackdowns, ANPO was reauthorized, and it was demonstrated that no, actually, things will not be allowed to change. From this point on, most Japanese people became increasingly disengaged from politics because they correctly determined that their votes and protests did not matter, except to the extent that they reinforced the status quo.

> Democracy isn't in their DNA, it was imposed.

Separately, your depiction of the imposition of democracy is also entirely incorrect and ignorant of history. Japan had one of the most politically active and engaged populations in it prewar period, but this was strangled by its ruling elites because popular political movements were almost universally left wing. The perfect example of this was that the expansion of universal male franchise in response to widespread labor unrest was paired with the outlawing of left wing political parties.

Why is the argument unconvincing to you after you've just provided a bunch of evidence as to why Japanese people aren't engaged in politics and there is no opposition here?

I disagree specifically with the framing that the “the population and the country suffers greatly because of this” as it was demonstrated that mass political movements would never be allowed to exert control over its politics. It’s an entirely rational response to a sham democracy. The country (now) suffers greatly as a result of the course the U.S. set it on by subverting its democracy to protect its own interests.

As someone who has a decent grasp on Japanese culture, I think your take is too conspiratorial. The issue is simpler than this. Japan has an extremely hierarchical society and authority must be respected. This isn't a great combination, especially when combined with a severely aging population.

Young people have very little chance to enter into politics or gain any traction at all. There is almost zero chance a 75 year old will vote for someone in their forties.

Combine that with the natural tendency for some to a lot of corruption among politicians and it's just a perfect storm of stagnation, corruption and vested interests, there is absolutely no US involvement required.

This comment continues to be an entirely ignorant of the country’s modern history, which belies the claim that you have a decent grasp on Japanese culture. I recommend you spend some more time reading and less time making Orientalist claims of no substance.

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

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.

most data you see in reporting likely comes out of a bloomberg terminal.

https://www.bloomberg.com/professional/products/bloomberg-te...

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

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.

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

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?

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.

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

>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.