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Japan's "interest rate hike" reversed? The market may still have room for positive growth in the short term

By: blockbeats|2024/12/12 18:45:01
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Original title: "The Bank of Japan is reportedly "inclined not to raise interest rates" next week. The yen arbitrage trading space continues. Can Bitcoin continue to rise? "
Original author: James, BlockTempo

The Bank of Japan will hold a monetary policy meeting from the 18th to the 19th. The 9 members of the Monetary Committee will then review whether to raise interest rates from 0.25%. However, according to Reuters, five sources said that the Bank of Japan is inclined to keep interest rates unchanged this time because policymakers want to spend more time examining overseas risks and clues to next year's wage outlook.

The report mentioned that the Bank of Japan has not yet reached a consensus on the final decision, because some members of the Monetary Committee believe that Japan has met the conditions for raising interest rates in December, but some members of the Monetary Committee believe that the rebound of the yen has eased price pressures and the Bank of Japan is not in a hurry to raise interest rates.

Originally, according to a Reuters survey last month, more than half of economists expected the Bank of Japan to raise interest rates this month, and about 90% of respondents predicted that the Bank of Japan would raise interest rates to 0.5% by the end of March next year, but the market now expects the probability of a rate hike in December to be less than 30%.

With the economy growing moderately, wages rising steadily, and inflation exceeding the 2% target for more than two years, there is growing confidence within the Bank of Japan that conditions for further rate hikes are gradually forming, and the Bank of Japan is likely to maintain its confidence in the economic outlook and continue to believe that consumption trends are growing moderately, sources said.

However, there is little urgency to raise rates now because the yen's recent rebound has reduced inflationary pressure from raw material imports, in contrast to the July rate hike to 0.25%, when the yen's rapid depreciation pushed up import prices and increased the risk of higher-than-expected inflation.

The Fed is expected to cut interest rates by 1 basis point this month

While Japan is inclined not to raise interest rates this month, the Fed will also announce its latest interest rate decision at 2 a.m. on the 19th, Taiwan time. The data released by the United States on the 11th showed that the Consumer Price Index (CPI) in November increased by 0.3% month-on-month and 2.7% year-on-year, which was in line with market expectations. Although the inflation data accelerated from the previous month, the market believes that it is still not enough to prevent the Fed from cutting interest rates at this meeting.

According to CME's FedWatch tool, the market expects that the probability of the Fed cutting interest rates by 1 basis point at the meeting next week is 98.6%.

However, as the US inflation situation has risen for the second consecutive month, the Fed's interest rate decision may become more complicated, and the long-term interest rate cut trend may slow down, which means that the yen carry trade may still have room to remain attractive.

Does the cryptocurrency market still have room for bullishness in the short term?

Experts analyzed that the current overall economic situation has allowed Bitcoin to return to $100,000 under the background of the continued maintenance of the yen arbitrage space. If Japan continues not to raise interest rates and the United States continues to maintain the status quo of long-term inflation uncertainty, the cryptocurrency market will still have room for bullishness in the short term.

However, investors should still pay attention to the rapid overall economic policy changes in the United States and Japan. As long as the arbitrage space disappears, the yen arbitrage transaction liquidation wave in early August this year may reappear, once again impacting the global financial market.

The Bank of Japan decided to raise interest rates by 15 basis points at the end of July this year, and the Federal Reserve was preparing to cut interest rates at the time, which led to a sharp rise in the yen, compressing the profit space of the "borrow low-interest yen, buy high-interest currency" arbitrage transaction, causing a large number of investors to close their positions at the time, impacting the global stock market and the cryptocurrency market, which collapsed in early August.

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