Market Anxiety: What Japan's Interest Rate Decision Means for Investors Tomorrow
The market is leaving people emotionally drained.
Remember, today is another significant event.
I mentioned a few days ago that Thursday and Friday were likely to be tough days.
But why did I say that?
Think back to August 5, 2024.
Look at the prices of all cryptocurrencies.
The global stock market experienced a major shakeup, with NASDAQ dropping 16%.
What caused this?
Japan raised its interest rates.
For those unfamiliar, borrowing from Japanese banks has been almost free, allowing investors to borrow money from Japan and invest in the U.S. stock market without interest costs.
However, on July 31, 2024, Japan unexpectedly raised its interest rate to 0.25%.
As one of the world's strongest economies, Japan's low interest rates encourage large institutions and companies to take loans and invest in stock markets.
Now, today marks the day when Japan's Federal Reserve will meet to decide on the next interest rate change.
It's anticipated that the rate will rise to 0.5%, an increase of another 0.25%.
What will the market's reaction be?
Many are anxious, fearing a repeat of the August 2024 response.
However, let me clarify what might happen.
Back in August, the sudden 0.25% rate hike caught everyone off guard.
This time, there's a 95% likelihood of a 0.25% increase, meaning the market has likely already factored this news in.
Therefore, when the announcement is made, we could see a surprising market rally.
On the other hand, if Japan raises rates by less than 0.25%, we could see a significant market surge.
It's highly unlikely they will increase it by more than 0.25%.
Still, it's essential to remember that sometimes the market's reaction is more critical than the news itself.
We need to watch this situation closely.