Yen and U.S. Dollar Adjustments Arbitrage trade closing Jesper Koll, a veteran investor who remains bullish on the Japanese market, said this was a positive development for Japan.
Cole, director of experts at Monex Group, said in an interview with CNBC’s “Squawk Box Asia”: “This forces investors to look at the real Japanese strategy… not just quick carry trades, borrowing at near-zero interest rates in Japan and investing in high-end Risk assets.
Japanese yen carry trade Started relaxing last weekThe Bank of Japan raised interest rates and the yen strengthened, leading to a sharp sell-off in global markets.
“I actually think the big, sharp correction that happened last week was actually quite healthy,” Cole said, adding that the yen’s weakness was responsible for the Nikkei’s record high.
USD/JPY
“Pricing money is the right thing to do. An economy running at zero interest rates, an economy with central banks leading government debt purchases, that’s not how capitalism is supposed to work,” Cole added.
Jean-Claude Trichet, former President of the European Central Bank, also said told CNBC last week A USD/JPY correction is “long overdue” and could be “healthy” for the market.
Koll said that as much as 75% of yen carry trades may have been unwound, although the total size of the carry trade has not yet been reliably determined.
Japan’s Nikkei 225 stock index rebounded sharply following its historic decline early last week. It rose as much as 3% on Tuesday.
Kerr said financial markets were more worried about a U.S. hard landing and a collapse in U.S. two-year Treasuries than a move by the Bank of Japan to raise interest rates.
Nikkei 225 Index
Uchida ShinichiThe deputy governor of the Bank of Japan said last Wednesday that the bank needs to maintain monetary accommodation at current policy rates in the face of global volatility.
However, the day after Uchida’s statement, the Bank of Japan released a summary of its monetary policy meeting, showing that the Bank of Japan is willing to Policymakers raise interest rates further.
Cole predicts that the Bank of Japan will not remain cautious for too long and will soon continue normalizing interest rates, with the policy rate likely to be around 1.5% by this time next year.
This will help shift the focus from Japan’s previous “bubble economy” caused by long-term maintenance of near-zero interest rates to the domestic economy, he said, adding that corporate restructuring and continued real wage growth provide bullish reasons for Japan.
Real wages in Japan grew by 1.1% Wages rose in June for the first time in 26 months compared with a year ago.
