| Date | Event | MarketsReaction |
|---|---|---|
| Aug 07 Wed | BOJ dovish signal | |
| Aug 06 Tue | JP stocks whipsaw back; US Futures signal rebound | |
| Aug 05 Mon | JP stocks plunged; US stocks rout | |
| Aug 02 Fri | NFP weaker than expected | |
| Aug 01 Thu | BoE cut for this first time since 2020 | |
| July 31 Wed | Fed keeps rates unchanged; BOJ hikes rates |
Japan
Equities
Macro
Wed, Aug 07
Another headline from BoJ. Deputy Governor Shinichi Uchida sent a strong dovish signal as historic market volatility rises in JP market by pledging to refrain from hiking interest rates when the markets are stable.
Markets responded to Uchida’s speech favorably. By Wed Aug 07, JPY weakened by more than 2% against USD, bond futures spiked higher and stocks rebounded immediately after his comments, the first public remarks by a BOJ board member since the bank raised rates on July 31.
Regarding the recent turmoil, Uchida said the catalyst was worries about the US growth outlook, and a correction in the JPY resulting from the latest BoJ hike amplified those moves in the domestic Japanese market, particularly JP stocks.
The volatile Swap market is now showing just a 20% chance of a 0.25% hike by the December BOJ meeting, down from the 60% the day after last week’s cut.
FX
The critical element for JP and global equities, is the strength of JPY, which is itself an expression of the US economic outlook. For now, USDJPY is fluctuating around 145-147. If it remains fairly non-volatile, and perhaps grinds higher, it will support a Nikkei recovery and a return to normalcy.
The JPY Carry Trade is unwinding. Before BOJ’s hike, markets were betting that JPY would get even weaker, but a shift in th expected path of Japanese interest rates vs US ones put paid to that. Thus, people are in a panic to get rid of the Short-JPY positions,