For ages, the rates from the Bank of Japan have sat at -0.1%. That is, until March, when they finally decided to raise by 0.2%. Shocking absolutely no one, life went on. SPY even had an amazing bull run.
Yet last week, the bank of Japan raised the rates by 0.15%, and the market began its sudden downward march. And Monday morning, we woke up to an event so remarkable that the media has collectively settled on the name Black Monday.
Many wallstreetbets users found their favorite brokers, such as Schwab, Fidelity, Wells Fargo, RobinHood, and Vanguard glitching and stopping them from panic selling. Looks like everyone woke up, tried to log in, and these brokers could not deal with the spike in traffic. Just want to point out: Interactive Broker worked fine through this mess.
The lay explanation for the panic goes like this: A bunch of people borrowed cheap money from Japan, converted borrowed Yen to USD, and used that money to buy US equities. When the bank of Japan raised the rates, these people received a margin call and were forced to sell their equities to pay back some of the money.
So if I were to assume this is what's happening right now, it makes me wonder just how much of Japan's free money has made its way overseas, and how deep of an effect it has had on our markets.
But why now? Why did a 0.15% interest rate hike cause a massive selloff, but a 0.2% rate hike back in March did not?
I am still skeptical about this narrative. The media tends to pick up random narratives that the analysts put out. Then all the media outlets copy each other and the narrative gets repeated until the sources are lost, and any information of value gets lost. But it also shows how easy it could be for hedge funds to manipulate the market by putting out statements and having the media distort and amplify their message.
USD relative to YEN had begun losing value since July 11. And by the time of the interest rate decision, USD/YEN lost 5% of its value. Since the rate decision USD/YEN has lost another 5% in value. So it supports the narrative that people are buying up YEN and selling USD. However, the selloff began several weeks before the rate hike.
It's hard to believe that this event alone is triggering such a deep market selloff.
I have a suspicion that something else is happening in the market that we are not aware of. I don't mean to fearmonger, but there is a very real possibility that some smart people have realized that there is deeper trouble brewing, and have started a selloff.
Of course, it could be hivemind hysteria not based in reality. Or given how hard the Japanese stock market has been hit, maybe things really are that bad, and we'll see some banks in Japan go under.
Bank of Japan raises rates by 0.15% and causes market apocalypse.
byu/tradepennystocks inwallstreetbets
Posted by tradepennystocks
28 Comments
Time will tell
Wait, it really was only 0.15%?
However, as I understood the Japanese economy works a bit different than most other countries, having almost no inflation. But dont know exactly
If someone knows, it’s Jamie Dimon
BoJ are always hesistant to raise the rates due to the fear that consumption and investment will drop massively.
But they finally did it. I hope that this doesn’t result in Japanese economy to crash because
Japanese love to save. They are odd bunch but in a good way.
Thx for taking the time to break that down
The mayo man knows… he always knows…
Good post. News outlets posts garbage to rationalize the movement. Likely nothing to do with what really happened.
A decent chunk of the tech stocks that make up the sp500 are in an AI bubble. That was part of it as well.
The top tech stocks have been holding up the sp500 generally.
Dumb hypothesis:
They woke up *Saturday* morning, finding out US market had tanked overnight and a recession was imminent, and just panic sold on their Monday before the US would inevitably collapse.
Cue Tuesday, the US are still kicking, the invasion of Taiwan turned out to be the trailer of a new Taiwanese TV show, but most importantly *RFK Jr. admitted he killed the bear*.
My guess is, as Buffett has been building his cash reserve for the last few months, that his suite of metrics is telling him something.
People are on edge because of it.
Got to end of second paragraph then read OPs name and bounced
Look for the leverage, its always there.
In March interest went from negative to positive this was a shift that changed how things were traded and offered. Risk wasn’t necessarily accurately calculated because this is an unusual event. Interest going up 150% over night is a huge increase in risk and is easier to calculate. In fact I’m guessing that lots of positions that were not shored up when the interest went positive have also been reevaluated
How do you have a negative interest rate? Japan would pay me .1% to loan money?
You think that was a market apocalypse? Zoom out bro lol
I mean it did kind of correlate exactly what the Fed going in to cutting mode though so you had a double whammy. First there’s the rate hike and second you have the rate cuts on the USD. Maybe it was a stop hunt, maybe some large banks went looking for positions? It’s hard to say but if we recover from this relatively quickly it’s extremely suspicious
The blame shift on Japan monetary policy is a major cope imo. This feels like a big correction more than a recession to me.
Can an individual player do the Japan yen carry trade or only institutions can do it?
Apocalypse is -2%
Let’s see how the week unfolds honestly I wasn’t even aware so many people were investing while borrowing ing from Japan. Also happy for them finally their economy may be going towards inflation and growth.
I don’t get why they raised it again so soon after not doing anything
So much for honor and way of the samurai 
market is forward looking and people are not stupid. OFC there are other factors that are at play, BoJ raising rates is just the last straw that broke the camel’s back.
mostly likely case is some big player tried to diamond hand through this USD and stock dip, but got margin called when BoJ said no
I think the Monday crash was a panic selling following Japan market crash, but in a long run, I don’t think it will affect the US stock market. When Nikkei crashed in the 90s, did that affect US stock market at all?
The activity taken with the devaluing yen works till the japanese government starts selling us treasury securities to pull value back into the yen. Then people are now set pay back a loan that they no longer have the currency to pay back. After a second rate hike and a second sell off of treasures it’s clear that the Japanese government intends to do this because the down force on the yen from their borrowing practices is damaging to their economy. Which you can see in the 5 day chart usd vs yen as the calls have generated an increased demand for yen.
my peanut brain thinks its simple…tech is over bought. and hedge funds are finally wanting to take their profits. and warren buffet hoarding cash also spooks the market, no one ever ignores what he does.
market makers are taking their profit. retail traders are selling to cover their over leveraged positions at the bottom. and you know this story, its in the traders bible. The market makers start buying, causing demand, and prices go up…
Interesting, but how does the fact that Nikkei recovered a huge portion of yesterday’s loss fit in? Is it a counter-overreaction to yesterday’s overreaction?
Damn. Infinite money hack. Government buys puts. Raises raises to 3%