“They won’t raise rates again, at least for the rest of the year. Whether they can raise rates once before March next year is unclear,” Makoto Sakurai, a former BOJ board member, told Bloomberg in an Aug. 12 note.
In early August, the BOJ abruptly raised its benchmark rate to 0.25%, prompting a sharp sell-off in stocks and crypto markets.
The rate hike disrupted the yen carry trade — where investors borrow yen at low rates and use those funds to buy foreign assets.
Notably, the catalyst wasn’t the rate hike itself, but what happened afterwards: a surge in the yen in foreign exchange markets. Starting July 31, the dollar-yen exchange rate fell from around 153 yen to 1 dollar to 145 yen.
Overnight, yen-denominated loans became very expensive.
