● Yen-Carry Trade Panic
Analysis of Japanese Interest Rate Changes and Economic Outlook
1. The Past 30 Years of Ultra-Low Yen Era and Negative Interest Rate Policy
Japan entered an era of ultra-low yen after experiencing the Lost Decade from the late 1990s.
The zero and negative interest rates were introduced under Abenomics to stimulate the economy, but the expected economic stimulus effect was minimal.
Due to the low yen policy, the Japanese people experienced both pride and economic poverty simultaneously.
The economic, interest rate, and Japanese economic base remained in a prolonged low-interest rate environment, resulting in a contraction in both consumption and investment.
2. Recent Interest Rate Hikes and Impact on Economic Entities
The Bank of Japan (BOJ) started raising interest rates in March 2024, moving away from negative interest rates for the first time in about 17 years.
As the base interest rate rose to 0.5%, market interest rates, including deposit rates and government bond yields, are also trending upward.
Citizens with savings are seeing positive effects from increased interest income; conversely, economic entities highly dependent on loans are facing increased interest burdens.
Considering the overall asset structure, the Japanese economy is showing a pattern of positive and negative effects coexisting due to high-interest rates.
3. Changes in Capital Markets and Consumer Economy
Despite the interest rate hikes, Japan’s retail sales initially contracted somewhat but showed a recovery trend towards the end.
The employment market remains robust, with both the number of employed people and the employment rate showing stable figures.
Nominal wages are on the rise, but real wages are lagging due to the higher inflation rate, although there are signs of gradual improvement.
The stock market is also maintaining a gentle upward trend after interest rate hike adjustments, showing a healthy flow in the overall capital market.
4. Future Prospects and the Possibility of Yen Carry Trade Liquidation
Both the BOJ and private institutions forecast that the Japanese economy will converge to 1% growth and a 2% inflation target in 2025-2026.
The Bank of Japan is likely to implement additional interest rate hikes with a target neutral interest rate of over 1% (approximately 1.2%).
The gradual interest rate hike narrows the interest rate gap with the United States, implying the possibility of a shift from yen carry trade to yen carry liquidation.
Yen carry liquidation is expected to proceed gradually rather than radically and is expected to support the size and stability of the Japanese capital market.
Although positive factors (increased financial assets, consumption recovery, stable employment) and negative factors (high inflation, initial consumption contraction) are mixed across the economy, the Japanese economy is taking a step towards normalization.
Summary
Japan failed to stimulate the economy despite a long era of ultra-low yen and negative interest rate policies.
Recently, the Bank of Japan has started raising interest rates, showing increases in deposit rates and government bond yields, stable employment, and retail sales recovery.
High-interest rates are having positive effects across the economy, such as expanding savings interest income, and it is expected that about 1% growth and a 2% inflation target will be achieved in 2025-2026.
In addition, the gradual interest rate hike will lead to a gradual yen carry liquidation, contributing to capital market stability.
This article is a comprehensive analysis of the latest information related to economy, interest rates, Japanese economy, low yen, and yen carry.
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Interest Rate Outlook Update
Japanese Economy Analysis
*YouTube Source: [경제 읽어주는 남자(김광석TV)]
– 일본 금리인상 많이 남았다. ‘엔캐리청산 공포’ 오는가? [경읽남 184화]
● Homeplus-Crisis
Homeplus’s Application for Rehabilitation Procedures and Domestic Economic Impact: Essential to Understand the Key Points
Overview and Background of the Incident
Homeplus has filed for court receivership.
It operates as a standalone retailer without support from group companies.
The situation of continuous deficits and accumulated debt since 2021 has worsened.
It has been in a state of no operating profit due to continuous deficits for the past four years.
Despite attempts at sales and restructuring, it has entered rehabilitation procedures due to a lack of debt repayment capacity.
Economic Ripple Effect
The application for rehabilitation procedures is not just a problem for one company.
As the second-largest retailer in Korea, it is highly likely to impact the financial and bond markets.
If a large company collapses, a domino effect will occur on partner companies and SMEs with outstanding debts.
The country is also closely monitoring it as an emergency.
Concerns are raised about a vicious cycle, such as instability in the bond market and rising fund-raising interest rates.
Market Impact and Future Prospects
The issue of bond stability is likely to intensify in the process of rehabilitation procedures.
Due to the burden of debt, the ability to repay debt is weakened, and additional sales and reorganization attempts are expected to continue.
Concerns are raised that anxiety will spread in the financial market, leading to a contraction in investment sentiment.
Policy measures are expected from the government and financial authorities to stabilize the situation.
Along with this, it is essential to analyze the overall flow of the issue with key words related to the economy, distribution, bond market, debt, and policy.
Summary
Homeplus has filed for rehabilitation procedures due to ongoing deficits and accumulated debt problems as a standalone retailer.
Due to this, a domino effect is feared on the domestic economy, especially the bond market and partner companies.
In the process of court receivership, a vicious cycle is expected, such as rising fund-raising interest rates and rehabilitation instability.
The government and financial authorities are in a situation where they must come up with measures.
Pay attention to key words related to economy, distribution, bond market, debt, and policy.
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*YouTube Source: [Jun’s economy lab]
– 현재 심각한 홈플러스 사태
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