On August 5, the Japanese stock market experienced a "Black Friday" with the daily average 225 index plummeting by 12.4%, dragging down the Korean stock market as well. The crypto market was not immune to the fall and did not follow the rise. As for the US stock market? Hehe, it is estimated that the storm is coming.
As for the culprit behind this, we have to talk about the "carry trade". To put it bluntly, it is a group of guys who are too clever for their own good, and want to make a lot of money without any investment, and make a fuss about the interest rate gap between Japan and the United States. Japan's economy has been in recession for 30 years, and negative interest rates have become the norm, while the United States has loose monetary policy and the stock market is as stable as an old dog. Therefore, the bigwigs on Wall Street borrowed money from the Bank of Japan at zero interest, bought Japanese stocks, and then converted most of the money into US dollars to make money in the US stock market, and enjoyed the dividends of the appreciation of the US dollar. This deal is so cool!
But the problem is that the scale of this carry trade is so huge that it is hard to count the specific figures. The Japanese have become cash machines, the economy has been drained, the yen has depreciated, and inflation has soared. The Bank of Japan is also in a difficult situation and dares not raise interest rates easily for fear of causing greater chaos.
As a result, the Bank of Japan could not withstand the pressure and slightly raised the interest rate by 15 basis points. This move made the carry trade institutions cry in the toilet. Why? Because their assets in the United States had to pay higher yen interest, and there was also exchange rate loss, a double blow! In order to stop the loss, they could only sell frantically, which triggered a chain reaction, and the US stock market also suffered.
This scene is simply a "stampede" in the financial world. Those who run first may be able to keep their pants, but those who run later can only run naked. Even the stock god Warren Buffett has fallen. He made a lot of money by buying Japanese stocks with yen at the beginning of the year, but now he has lost everything, and dragged down the US and Japanese stocks with him.
The game behind this is as complicated as a Jin Yong novel. The competition between the two great powers of China and the United States, the greed and fear of Wall Street, interweave into a thrilling financial picture. It can only be said that the financial market is always a place where risks and opportunities coexist. If you are not careful, you may be doomed. So, investors, take it easy, don't just watch the fun and forget your wallet!
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