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Tokyo stocks plunge on tech sell-off amid rising interest rates

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down 761.60 points, or 1.94 percent

If you think that is a plunge you are new to investing. The Nasdaq was down over 70 percent after the internet bubble burst, and during the Lehman shock margin investors would wake up broke. I know, I know, this time is different.

3 ( +4 / -1 )

"There is the possibility of the BOJ raising interest rates in July. 

Interesting situation. There must be millions of home owners in Japan on variable rate mortgages, and there is a big spending government that has accumulated more than a quadrillion yen of public debt, which had better be paid back lest no one will want to keep loaning money to the government anymore… and the central bank itself owns half the debt and in hiking interest rates would have to start paying financial institutions to keep money at the BOJ… while its earnings from its bloated balance sheet are meager thanks to having bought all the public debt at high prices…

Fingers crossed that Japan can meander through this tough situation without much hardship all round.

4 ( +4 / -0 )

"There is the possibility of the BOJ raising interest rates in July. This is a negative for growth stocks,"

The first part may be correct, but I doubt "negative for growth stocks" is very high on the BOJ's list of priorities.

It'll be more a case of whatever keeps the plates spinning.

2 ( +2 / -0 )

200 jpy / $ is where it should be and will be.

2 ( +4 / -2 )

Let’s say the BOJ does hike rates.

Then, the yield differential with the US will (all else equal) shrink by 25 basis points, leaving a differential of about 5%.

I don’t think that will give the yen much reprieve. Indeed, it will likely beget more yen selling as the broad status quo remains evident.

So they’d have to hike again… quite a bit.

Over in Turkey, they took a cavalier approach to monetary policy, and now as they try to regain credibility, their policy rate is something like 40-50%. Ouch. Versus the yen the lira has actually been stabilizing recently… good news for the lira hopefully, and not bad news for the yen…

A weaker yen worth less than 200 to the dollar might be just fine for Japanese stock prices in yen terms, but will make things much tougher for many.

At some point time government has really got to get its act in order and change its ways. Reverting back to sound fiscal policy is a prerequisite for sound monetary and currency policy, in my view.

5 ( +5 / -0 )

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