TechFlow news, on September 3, according to Coindesk, Bank of Japan Governor Kazuo Ueda reiterated today that if the economy and inflation develop as expected, interest rates will be further raised. In a document submitted to a government panel led by Prime Minister Fumio Kishida, Ueda stated that even after raising benchmark borrowing costs at the end of July, the economic environment remains accommodative, with real interest rates still negative. This statement strengthened the yen, sending the dollar-yen exchange rate down from 147 to 145.85. Meanwhile, S&P 500 futures fell 0.5%, and Bitcoin declined 0.4% to $58,920.
Analysts noted that the Bank of Japan's tightening monetary policy stands in sharp contrast to the Federal Reserve's potential rate cuts starting in September, which could strengthen the yen and force traders to sell risk assets to repay yen-denominated loans. Arthur Hayes, co-founder of BitMEX, warned that the unwinding of yen carry trades could reoccur unless central banks increase money supply by expanding their balance sheets. According to Deutsche Bank data, as of October 2023, Japanese entities accounted for up to $20 trillion in carry trades.
