Aug 09, 2024 07:08 PM
FINANCE
Analysis: Do Japanese Rate Hikes Foreshadow Global Downturns?
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The Bank of Japan’s (BOJ) decision on July 31 to raise a key policy interest rate by 15 basis points to 0.25% sent the country’s stock market tumbling Monday, marking the largest single-day drop since 1987 and sparking a global market rout.
Although the Japanese market has since rebounded, and a deputy governor of the BOJ said Wednesday that the central bank will not raise rates further if the market is volatile, the events of the past week have fueled speculation of a global recession.
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- On July 31, the Bank of Japan raised a key policy rate by 15 basis points to 0.25%, causing a significant stock market drop.
- This interest rate hike fueled speculation of a global recession due to past instances where Japanese rate hikes preceded global downturns.
- The BOJ asserts no further rate hikes if the market remains volatile, with Japan’s economic sensitivity to global conditions highlighted.
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Who’s Who
- Lehman Brothers Holdings Inc
- Lehman Brothers Holdings Inc. was a major U.S. financial firm heavily exposed to the mortgage market. It collapsed in September 2008, marking the peak of the U.S. subprime mortgage crisis. The firm's downfall contributed significantly to the global economic recession that ensued.
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What Happened When
- August 2000：
- Japan ended its zero interest rate policy with a rate hike to 0.25%.
- March 2001：
- Japan’s key policy rate returned to zero.
- July 2006：
- The BOJ raised the policy rate to 0.25%.
- September 2008：
- The collapse of Lehman Brothers Holdings Inc. marked the peak of the subprime mortgage crisis.
- July 31, 2024：
- The Bank of Japan (BOJ) raised a key policy interest rate by 15 basis points to 0.25%.
- August 7, 2024：
- A deputy governor of the BOJ stated that the central bank will not raise rates further if the market is volatile.
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