In Asian trading on Wednesday, speeches by Bank of Japan officials supported the market rebound.
As of press time, the Nikkei 225 Index rose 3% on the day, the Topix Index rose more than 3%, and the dollar rose 1.8% against the yen to 146.55. The South Korean KOSPI Index rose 2%. The three major A-share indices collectively turned positive. The Hang Seng Technology Index rose 1%, and the Hang Seng Index rose 0.95%. The Taiwan Weighted Index rose 3%.
Earlier, Bank of Japan Deputy Governor Shinichi Uchida said that interest rates would not be raised when the market is unstable.
Shinichi Uchida said that if the economic outlook is realized, the degree of easing will be adjusted, and the current easing policy needs to be firmly maintained. He said: "If our economic forecasts, risk perceptions and the possibility of achieving expectations change due to market fluctuations, our interest rate path will obviously be adjusted. Unless we raise interest rates at the set rate, Japan is currently in an environment where it will not fall behind the curve. We will not raise interest rates when the market is unstable."
Shinichi Uchida also said that he personally believed that the US economy would be able to achieve a soft landing, and that there had been no major changes in the economic fundamentals of Japan and the United States, so the market's reaction to a single US data seemed too strong.
He also said that Japan's real interest rates are very low and monetary conditions are very loose.
Traders are weighing whether the recent global sell-off was an overreaction to weak U.S. economic data, with data from Goldman Sachs Group Inc. showing hedge funds took advantage of Monday’s plunge to buy stocks. In Asia, the question is whether the yen carry trade and the unwinding of leveraged positions in Japanese stocks have ended.
"The key factor for Japanese and global stocks is the strength of the yen, which itself is an expression of the outlook for the U.S. economy," said Kyle Rodda, senior market analyst at Capital.Com. "Currently, USD/JPY is hovering around 145. If it remains relatively stable, or even rises, it will support the Nikkei's recovery and return to normalcy."
The Japanese government and the Bank of Japan have agreed to closely monitor developments in the economy and financial markets.
Arindam Sandilya, co-head of global foreign exchange strategy at Goldman Sachs, said on Bloomberg TV that speculative investors have completed 50% to 60% of their yen carry trades. When the yen surged 11% in the past month, investors who used the cheap currency to invest in high-yielding assets were in trouble.
George Smith of LPL Financial said that while such a sharp drop in stock prices was worrying before, historical data shows that "declines, pullbacks and corrections of 10% or more" are a normal and healthy part of any bull market. Since about 1928, 94% of years have experienced at least a 5% retracement, and 64% of years have had at least one 10% correction.
“We believe the widespread occurrence of these events should provide reassurance to equity investors, allowing them to remain patient, remain invested, and most importantly, not panic,” Smith said.
Hiroyuki Ueno, strategist at SuMi TRUST Wealth Management, said Japanese stocks are expected to resume their upward trend in the long run after their recent historic decline, as corporate earnings remain strong and the overall domestic economy has shown signs of improvement. He believes that several factors are supporting demand for Japanese stocks, one of which is that Japanese companies use their cash to buy back more shares. He added that if more buybacks by Japanese companies become a reality, it will have a positive impact on the nervous market sentiment caused by the recent turmoil.
Article forwarded from: Jinshi Data
