日本負利率完結| 拆倉潮一觸即發?! 資金流去哪個市場?(English +中文CC)
Summary
TLDRThe Bank of Japan has ended its eight-year negative interest rate policy, raising rates to 0.1% for the first time since 2007. Despite expectations of a yen rebound, the currency fell due to continued loose monetary policy and strong US economy. The market's reaction was mixed, with past rate hikes showing varied impacts on stocks. Institutional investors remain optimistic about Japan's economic prospects, with significant buying activity in Japanese stocks. The Bank of Japan's large holdings in ETFs and the potential impact of future sales on the market are a concern. Corporate governance improvements are driving a revaluation of Japanese stocks, which are still considered undervalued compared to global markets.
Takeaways
- 📈 The Bank of Japan ended its negative interest rate policy and raised rates for the first time since 2007, moving from -0.1% to 0.1%.
- 🌐 This decision followed global quantitative easing trends, where Japan had previously been more aggressive with rates below 0%.
- 🔍 Market expectations were that the end of these policies would strengthen the yen, but it actually fell after the announcement.
- 💹 Historically, Japanese stock markets have risen after interest rate hikes, with certain sectors like steel and machinery outperforming.
- 🏦 The Bank of Japan's policy changes also included ceasing the purchase of ETFs and trust funds to support the market.
- 🌿 Despite ending its market support, the Bank of Japan still holds a significant portion of the Japanese stock market, estimated at 7%.
- 🌋 The economic impact of the policy change is complex and not solely dependent on interest rates; other economic factors are also crucial.
- 💼 Institutional investors remain optimistic about Japan's economic prospects and have been buying Japanese stocks aggressively.
- 💵 Japan's economy has transitioned from deflation to stable inflation, and wage increases are at a 30-year high, potentially boosting consumer spending and economic growth.
- 📊 Japanese stocks are considered undervalued compared to other markets like the US, with lower P/E and Price to Book ratios.
- 🏢 Improvements in corporate governance in Japan are leading to a revaluation of Japanese stocks, reducing the discount previously applied by investors.
Q & A
What is the main reason behind the Bank of Japan's recent decision to raise interest rates?
-The Bank of Japan raised interest rates because it has achieved a stable 2% inflation, marking the end of its eight-year-long negative interest rate policy.
How has the market reacted to the Bank of Japan's interest rate hike?
-Although many expected the yen to rise after the rate hike, it actually fell further because the Bank of Japan emphasized that it would maintain a loose monetary policy without hinting at further rate hikes. Additionally, the strength of the U.S. economy has kept the interest rate differential between Japan and the U.S. wide, leading to a continued decline in the yen.
What has been the historical impact of previous interest rate hikes by the Bank of Japan on the stock market?
-Historically, the impact of interest rate hikes on the stock market has been mixed. In 2006, Japanese stocks rose by 20% after a rate hike, while in 2000, the Nikkei index fell by 30%. Interest rates are only one factor that affects the market, and other factors, such as economic prospects, play a more important role.
Why are investors not worried about the Bank of Japan stopping its ETF purchases?
-The Bank of Japan has already significantly reduced its ETF purchases since last year, and the market has largely adjusted to this. Therefore, the formal announcement of stopping ETF purchases is not expected to have a major impact on the market.
What concerns do investors have about the Bank of Japan holding a large amount of Japanese stocks?
-Investors are worried that when the Bank of Japan decides to sell the stocks it acquired through ETFs, it could negatively impact the stock prices of companies like Fast Retailing (parent of UNIQLO) and semiconductor companies such as Advantest and Tokyo Electron, where the Bank of Japan holds significant shares.
Why are foreign institutional investors still buying large amounts of Japanese stocks despite the interest rate hike?
-Foreign investors are optimistic about Japan’s future economic prospects, citing reasons like stable inflation, rising wages, and corporate governance improvements. Additionally, Japanese stocks are seen as relatively cheap compared to U.S. stocks.
How does Japan’s current Price-to-Earnings (P/E) ratio compare to the United States?
-Japan's current P/E ratio is around 14 times, while the U.S. stock market has a P/E ratio of 20 times, indicating that Japanese stocks are cheaper in comparison.
What recent policy changes in Japan could drive further stock market growth?
-The Japanese government has introduced policies to encourage domestic investors to buy stocks, which could create additional demand for the stock market.
How has Japan’s corporate governance improvement impacted stock valuations?
-Japan’s improved corporate governance has gradually eliminated the discount that investors used to apply to Japanese stocks due to poor governance practices. As a result, stocks are returning closer to their true value, which has boosted valuations.
What are the broader economic implications of rising wages in Japan?
-The recent wage increases in Japan, with an overall salary rise of 5.3%, are expected to boost consumer spending, which could stimulate the economy and contribute to GDP growth. This, in turn, is seen as a positive indicator for asset prices, including stocks and real estate.
Outlines
📈 Impact of Japan's Interest Rate Hike on Stocks and Yen
After 17 years, the Bank of Japan raised interest rates, ending negative interest rate policy and other loose monetary policies like yield curve control. This move was anticipated by investors and was a response to Japan achieving stable 2% inflation. Historically, interest rate hikes have had varied impacts on the stock market, with some sectors like steel and machinery performing well, while others like banks and retail underperformed. Despite the rate hike, the yen did not strengthen as expected but continued to fall due to the Bank of Japan's commitment to a loose monetary environment and strong U.S. economy. The video also introduces AhJu, a professional investor sharing market insights and investment strategies.
💹 Bank of Japan's Stock Holdings and Institutional Investor Trends
The Bank of Japan's decision to end its purchase of ETFs and trust funds raises concerns about the potential impact on the stock market. Despite holding a significant portion of the Japanese stock market, the bank is unlikely to sell its stocks abruptly to avoid market collapse. Institutional investors continue to buy Japanese stocks due to factors like Japan's transition to stable inflation, significant wage increases, government policies encouraging stock investment, and relatively lower stock valuations compared to the U.S. market. Corporate governance improvements are also attracting investors, leading to a potential revaluation of Japanese stocks. The video concludes with an invitation to join Patreon for more detailed analysis and information on the Bank of Japan's stock holdings.
Mindmap
Keywords
💡Quantitative Easing
💡Interest Rate
💡Yield Curve Control
💡Exchange Rate
💡Investment Banks
💡ETFs (Exchange-Traded Funds)
💡Inflation
💡Monetary Policy
💡Corporate Governance
💡Shareholder Return
💡P/E Ratio
Highlights
The Bank of Japan raised the interest rate for the first time since 2007, signaling the end of 17 years of quantitative easing.
Japan has finally achieved a stable 2% inflation, allowing for the shift away from negative interest rates.
Despite expectations, the yen continued to fall after the rate hike, due to the Bank of Japan's decision to maintain a loose monetary environment.
The interest rate hike in Japan is not necessarily leading to further increases in the yen’s value, especially with the ongoing strength of the U.S. economy.
Historically, the impact of interest rate hikes on the Japanese stock market has been mixed, with stock performances varying by sector.
The best performing sectors during past rate hikes were steel, machinery, and wholesale, while banks and retail sectors suffered.
The Bank of Japan has already ceased buying ETFs and JREITs, signaling the end of direct market support, yet Japanese stocks have continued to rise.
The Bank of Japan currently holds 7% of the Japanese stock market, worth over $450 billion USD, with significant unrealized profits.
One major concern for investors is how the Bank of Japan will sell its stock holdings without crashing the market.
Foreign institutional investors have poured 2 trillion yen into Japanese stocks within the first three months of the year, indicating strong confidence in the market.
Japan’s transition from deflation to stable inflation, coupled with a significant 5.3% wage increase, is seen as a positive driver for the economy.
Japanese stocks are relatively cheaper than U.S. stocks, with a price-to-earnings ratio of 14 times compared to 20 times for U.S. stocks.
The improvement in corporate governance in Japan is gradually removing the long-standing undervaluation of Japanese stocks.
Institutional investors continue to view Japanese stocks as undervalued, particularly due to reforms in corporate governance that enhance shareholder returns.
Japanese stocks still have room to grow, given that foreign investors' exposure to the market is not as high as it was in 2021.
Transcripts
After 17 years of quantitative easing
the Bank of Japan finally raised the interest rate
Does this mean that
Japanese stocks, which have risen so much
in the past 2 years
will fall back?
What most Hong Kong people
are even more worried about is
whether the yen will rise
So now while it’s cheap now
buy in a little more yen first
Today's video will answer these questions
If you come to this channel for the first time
AhJu is a professional investor who worked
in investment banks for more than a decade
In this channel I will share
my views on the market and investment
and use my experience to share
something that can’t be learned from books
If you are interested in making money
Let’s subscribe to my channel
Okay
Firstly let’s talk about what happened
Because the Bank of Japan
has managed to return to a stable 2% inflation
So last week on March 19
they announced the end of the
negative interest rate policy that had been taken
for eight years since 2016
Like You know that the whole world
was doing quantitative easing before
The US interest rate had not yet dropped to 0.25%
but Japan was even stronger
and reduce the interest rate to below 0
to -0.1%
That is finally over now
and the interest rates was raised
for the 1st time since 2007
to 0.1%
And other extremely loose monetary policies
have also been cancelled
Such as yield curve control
And stop buying ETFs and trust funds
to support the market
What was the market's reaction to this news?
Investors have actually been waiting for
the Bank of Japan
to end these policies for a long time
It was expected to be done in January this year
But there was an earthquake earlier this year
which slowed down the economy
So this rate-hiking cycle has been delayed
And many people think that raised interest rates
would make the trend of the yen become stronger
Because in the previous three years
the JAP-USA interest rate differential
caused the yen to fall by half
USD/JPY exchange rate went from 100 to 150
Or to HKD, it fell from 7.6 to 5.2
So travelling and shopping in Japan
becomes much cheaper
Now they finally increase the interest rate
Many people predict that
this means that the yen will finally rebound
and increase in value
But after this news came out
the yen fell again
From 149 now to 151
That is 5.16 against HKD
Back to last year's low
Why does it continue to fall?
Because the Bank of Japan has emphasized that
it will maintain a loose environment
and has not hinted at further interest rate hikes
In addition, the U.S. economy is strong
and inflation has begun to be higher than expected
so the JAP-USA interest rate difference
may not be necessarily narrowed so quickly
Investors who do carry trades are then
not in a hurry to convert back into Japanese yen
Therefore, the Japanese yen not only did not rise
but continued to fall
And what impact does this policy change
have on the stock market?
If we look back at the past
interest rate hikes by the Bank of Japan
what impact did it have on the stock market?
The last time was July 2006
The interest rate at that time rose from 0 to 0.25%
One year after the interest rate hike
the Japanese stock market rose by 20%
And during this period of time
The best performing sector
was steel
machinery
and wholesale
kind of similar to the current situation
They increased by 50%
Sectors with the worst performances
were banks and retail
which fell by several percentage points
Although the Japanese yen
raised interest rates during this period
it also fell 3% against the US dollar
The last rate-hiking cycle before this
was in August 2000
The yen fell even more that time
From 110 to 125
That is a 10% devaluation
The Nikkei Index
fell by 30% the following year
The worst performing sector at the time was
electronics and IT
Instead
energy and utilities rose
If interest rates rise once
and fall at the another time
what does that mean?
It means that interest rate
is only one of the factors affecting the stock market
not the only factor
If it were that simple
falling when interest rates increased
rising when interest rate decreased
then everyone would be comfortable
The more important is to
understand Japan’s economic prospects
From this perspective
institutional investors are still very optimistic
Because in the past three months
they have continued to buy lots of Japanese stocks
I will talk more about this in a moment
Let’s talk about this policy change first
In addition to ending negative interest rates
and raising interest rates
the Bank of Japan will also
stop buying Japanese ETFs and trust funds
Many people are worried that
if they do so
will Japanese stocks fall back
without their support?
This answer is
no
Because in fact, since last year
the Bank of Japan has basically
stopped buying ETF to support the market
They bought the most
during the epidemic in 2020
In fact, they only bought it three times last year
And in terms of JREIT
which is Japanese real estate investment trust
They didn't buy any of it last year
So actually this policy
has already ended very early
Now it is just a formal statement to stop it
But the next problem is that
it bought so many Japanese ETFs
in the past few years
and now holds so many stocks
The market estimates that they now hold
7% of the entire Japanese stock market
worth more than $450 billion USD
And the Japanese stocks have risen so much
So there are 20 billion in unrealized profits
The Bank of Japan
is the only one among developed countries
that not only buys bonds but also stocks
during quantitative easing
Now that quantitative easing is over
and they hold so many Japanese stocks
how would they handle it?
It's not like holding bonds
because bonds have mature dates
So if you continue to hold it
the quantity will naturally decrease
But stocks are permanent
And this time they took this extreme action
to save the market
The market is saved now
But if they still want this tool
for the next time to save the market
they need to sell these stocks beck to the market
But how to sell it?
If they sell all of them at once
the market will definitely crash
In this way, all their hard work
and efforts to save the economy will be wasted
So the only option is to sell them slowly
But selling slowly
will still have a big impact on some stocks
Because when they supported the market
and bought ETFs
these ETFs just bought a bunch of stocks
Therefore, many of the largest shareholders
of these companies
are already the Japanese government
Such as the parent company of UNIQLO
Fast Retailing
This is one of the largest companies in Japan
with a market value of $100 billion USD
20% of its shares
are held by the Bank of Japan
due to ETF purchases in previous years
The market is very worried
about this type of stocks now
Because when the government
wants to reduce its balance sheet
and sell ETFs
it will have the greatest impact on these stocks
Other central banks
hold stocks with higher proportion
including semiconductor companies
that have risen sharply recently
Advantest
and Tokyo Electron
There are also several more
the Bank of Japan holdings of more than 10%
If you want to get the whole list
come to my Patreon
Let’s talk about the institutional investors
Foreign institutional investors
continue to buy lots of Japanese stocks
They have bought 2 trillion yen worth of stocks
in the first three months of this year
A lot of money has flowed
into the Japanese market last year
But throughout the year
there was only an inflow of 3.5 trillion
So it is a very large amount
that there has been an inflow of two trillion
in just three months of this year
Why do they keep buying?
There are several reasons
Firstly
Japan's economy finally turned from deflation
to stable inflation
And in the results of labor wage negotiation
that was released in mid-March
The overall salary increase is as high as 5.3%
This is the largest increase since 1991
If people have more money to spend
and buy more things
a cycle will be created to stimulate the economy
Therefore, economists are optimistic
about Japan’s future GDP growth
And this is usually good for asset prices
Therefore, Japanese real estate
and stocks continue to rise
The second reason
The Japanese government
has introduced some policies
to encourage Japanese people to invest in stocks
which will create a new demand
for the stock market
The third reason
The stock value is not that expensive
especially compared with the United States
The current P/E of the US stock market is 20 times
which is the blue line
How about Japanese stocks?
The yellow line of 14 times
If you look at the Price to Book ratio
and Return on Equity
A trend line lower than the diagonal
is considered as cheap
higher than it is considered as expensive
You can see that US and Indian stocks
are expensive on this chart
And Japanese trend line is below it
So it is cheap
In terms of position
According to Goldman Sachs
Although foreign investors bought
a lot of Japanese stocks over the past year
a total of 5 trillion
in terms of its position
The exposure of Japanese stocks among the globe
is not as high as in 2021
So to some extent
Some funds are still buying in
And the forth reason
It is the improvement of corporate governance
leading to an increase in total shareholder return
This is a big and important topic
Japanese stocks
have been undervalued for many years
Because people don't like
their way of corporate governance
Now they are finally willing to change
and this underestimation gradually disappears
That is, if something is originally worth $1,000
the investor will give it a discount
Let say $800
But because of improved corporate governance
This discount from $800
to $900
and it finally back to the true value of $1,000
This topic is very important
If you want to know more about it
you may watch my last YouTube video
The link will be put in the description box
and the end of this video
This is the latest policy change of the Bank of Japan
and the impacts on the market
If you want to know what stocks
the Bank of Japan holding
which make investors worried the most
and my regular view on the Japanese market
with the Japanese stocks I pay attention to
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That’s it for today’s video
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please give a like to support this channel
see you nex time
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