暴跌原因

Global stock markets enter panic plunge mode

In early August, the Bank of Japan and the Federal Reserve successively announced monetary policy decisions, among which the Bank of Japan announced a 25 basis point interest rate hike, while the Federal Reserve announced that the benchmark interest rate would remain unchanged, but clearly released a signal of a high probability of interest rate cuts in September.

The market was moved by the news, and the yen-dollar exchange rate soared sharply, and the "carry trade" of borrowing cheap yen to enter the high-yield market came to an end. The positive boost to the U.S. stock market from the Fed's clear interest rate cut signal only lasted for one day. In the trading days in early August, Japanese, European and U.S. stocks experienced a comprehensive decline.

The greater concern comes from the negative signals of the fundamentals of the U.S. economy. The ISM manufacturing index reflecting factory activity was lower than expected, the number of first-time unemployment claims hit a new high since August 2023, and the U.S. non-farm payrolls data in July showed that the unemployment rate rose further. For a time, panic about the impending recession of the U.S. economy swept the market.

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The Japanese government’s $20 trillion carry trade has finally exploded

At the end of last year, when the latest cycle of the yen carry trade was still in its relatively early stages (when the dollar was as low as around 140 yen), there were media outlets explaining why the Japanese economy was effectively dead, and the only thing missing was an announcement of when it died.

The reason: the $20 trillion carry trade that the Japanese government had been involved in for the past 40 years was a giant time bomb that could not be defused, and once it exploded, the Bank of Japan was doomed. The collapse of these trades would require central banks to coordinate a rescue operation within days.

Not surprisingly, central banks around the world had no idea what was happening, and usually panicked afterwards and unleashed a historic wave of rate cuts within weeks to stabilize the situation.

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