$BTC
Japan raises interest rates❓
Indiscriminate plunge📉
Global tycoon Buffett has also done it❓
July 31
The Bank of Japan raises interest rates by 15 basis points
The USD/JPY short-term fell 110 points, now at 151.81
Japan raises interest rates, warning of global financial storm! The era of cheap milk arbitrage ends, and the market panic plunges❗️❗️❗️
Why does Japan's 🇯🇵 interest rate hike have such a big impact on the global financial market?
Because the interest rate of the Bank of Japan was negative in the past few years, it is equivalent to giving you subsidies when you go to the bank to borrow money.
Take milk as an example. In Japan, due to the extremely low borrowing interest rate, even negative, you can borrow cheap milk from Japan at a very low cost. You can use these cheap milk to sell to the United States, Europe and other countries with higher interest rates, get a higher price difference for milk, and make a profit from arbitrage transactions.
This is the reason why we have recently experienced violent fluctuations in global financial and stock markets❓
🌤In the early years, many financial speculators borrowed yen: speculators and low interest rates borrowed yen.
⛅️Then they exchanged yen for US dollars or euros.
🌥Then invest in the United States or Europe: they use these US dollars to invest in assets such as US bonds or US stocks, because the interest rates there are higher, so they can make more profits.
Indeed, the US stock market has gone crazy in the past two years, especially chip stocks.
☀️Difference profit: The profit comes from the difference between the low interest rate paid for borrowing yen and the higher returns obtained by investing in the United States or Europe.
🧐So imagine that when this kind of arbitrage transaction reaches hundreds of billions or trillions of dollars globally, the energy will be amazing. After all, Buffett is also doing this, although he issued yen bonds to invest in Japanese stocks.
When Japanese interest rates suddenly change and this trend is significantly strengthened in the future, this is a panic expectation gap, which will trigger a wave of risks.
Because the demand for yen lent by the Bank of Japan will decrease, and the Bank of Japan also wants to get their milk back as soon as possible.
This is why the global financial market has recently experienced an indiscriminate panic and plunge
