The Japanese central bank surprised the markets with an “interest rate hike through the back door”. Experts expect heavy price losses. The effects can already be seen in Germany.
The Bank of Japan is likely to put further pressure on Europe’s equity and bond markets. In a surprisingly clear move, it tightened interest rate policy. “This once again underlines the restrictive approach globally,” said a dealer. Accordingly, the Nikkei index falls by 2.5 percent, the yen jumps up, for a dollar only 133 instead of 137 yen have to be paid. The tightening also shocks Bund futures in Germany, which shed 110 ticks.
Thomas Altmann from QC Partners calls it a “bang by the Japanese central bank”. The Bank of Japan is joining the chorus of restrictive central banks much faster than expected. The market only expected verbal hints that the bank is already trading today is a big surprise. “The increase in the permitted interest corridor is nothing more than an interest rate hike through the back door,” says Altmann.
The Bank of Japan’s action caught the stock markets completely unprepared. “These are small shock waves that the Japanese central bank is sending through the markets today.” And when those shockwaves meet low market liquidity so close to Christmas, the price falls could well be more severe.
