Japanese BOJ will not raise interest rates "for now"

As a former Japanese central bank board member confirms, further interest rate hikes will not be up for discussion until March at the earliest.

The Bank of Japan (BOJ) will not raise its interest rates further this year, a former central bank board member said.

"They won't be able to raise again for at least the rest of the year," Makoto Sakurai explained in a article from Bloomberg on Aug. 12.

Sakurai also doubts there will be further increases before March next year, it said.

As a result, stock and crypto investors can breathe a sigh of relief for now. Indeed, the BOJ's latest interest rate hike two weeks ago caused much panic in global markets.

In particular, participants in the so-called "Yen Carry Trade" were surprised by the sudden increase in interest rates. In this strategy, investors borrow yen at low interest rates and reinvest the funds in foreign assets.

With the appreciation of the national currency, yen-denominated loans became dramatically more expensive almost overnight. This caused a massive deleveraging by investors worldwide, such as by selling other assets such as crypto.

For them, last Monday felt like a reminder of the corona crash in 2020. The entire sector lost more than 10 percent in the interim, before a tentative recovery movement occurred during the last week.

As a result of the turbulence, the Japanese central bank backtracked somewhat on its earlier moves as early as last week. It calmed the markets by indicating that there would be no further interest rate hikes as long as stock markets remain unstable.

According to Sakurai, however, the increases are a necessary change for Japan, which has maintained interest rates between 0 and -0.1% for 17 years. The "normalization" of monetary policy, he said, due to the depreciation of the yen, must continue sooner or later.