The Bank of Japan decided to raise interest rates again at its monetary policy meeting last month (31st), raising interest rates from about 0 to 0.1% to 0.25%, bringing Japan's short-term interest rates back to the level of about 0.3% in December 2008.
Japan's policy of raising interest rates caused the market to fall, and the unwinding of carry trades rippled through turmoil in multiple markets including credit, stocks, U.S. Treasuries and cryptocurrencies.
Extended reading: Is the collapse of the 3,000 trillion yen arbitrage trade the cause of this bloodbath in the stock market?
Former Bank of Japan Governor: Japan will not raise interest rates again this year
In view of this, Makoto Sakurai, a former governor of the Bank of Japan, said in a recent interview with Bloomberg :
They won't be able to raise rates again for at least the rest of the year.
In the process of returning to normal monetary policy, the Bank of Japan decided to move from almost zero interest rates to a normal 0.25%, which is a good thing. However, this move requires a lot of energy, so "they should wait for a while to see" whether it is necessary further interest rate hikes.
In addition, Bank of Japan (Central Bank) Vice President Uchida Shinichi promised on the 7th that he would not further raise interest rates when the market is unstable:
Due to extremely volatile financial and capital market conditions at home and abroad, I believe the Bank of Japan needs to maintain its monetary easing policy at the current policy interest rate level for the time being.
Makoto Sakurai added that the Bank of Japan is changing from excessive monetary easing to moderate easing, and the Bank of Japan should resolutely indicate that it will continue to maintain accommodative policies . This policy has always been their principle.
As for whether the Bank of Japan will raise interest rates again before March next year, Sakurai said this is an uncertain issue.
JP Morgan Asset Management: Bank of Japan will avoid raising interest rates in the short term
Seamus Mac Gorain, global head of interest rates at JPMorgan Asset Management, recently pointed out that the Bank of Japan may avoid raising interest rates again in the short term, and whether it will further tighten policy in the future will depend on the direction of the U.S. economy.
The Bank of Japan does have a path to action again, but that depends on the Fed cutting interest rates and successfully stabilizing the U.S. economy. However, this path will not be realized if the United States falls into recession.
Mac Gorain believes that the Bank of Japan may have to wait until 2025 to further tighten monetary policy. He said:
The Bank of Japan may carry out a series of interest rate hikes, but this requires a relatively good global economic environment. Obviously, the Bank of Japan will not take action until markets stabilize, which also depends on whether the U.S. and global economies can avoid recession.
However, according to a Bloomberg survey, about 65% of 34 economists expect the Bank of Japan to raise policy interest rates again before the end of the year. However, after the turmoil in the US stock market, pricing in the swap market shows that the probability of a 25 basis point interest rate hike by December has dropped to about 30% from about 60% a week ago.
