In Japan, as much as half a year, the recession is constantly talking about this, Mr. Kuroda. Economic activity is declining. With zero interest rates and zero inflation (a fabulous country, isn’t it. The regulator, which has invested most of its reserves in American bonds, suffers losses due to currency revaluation (currently about 9%). It turns out an analogue of margin call, only on a state scale. Investors flee to the Japanese yen.
In Europe there are a lot of zombie companies that are overloaded with debt and will be forced to suffer losses due to rising inflation. With near-zero rates, this puts Europe on a par with the Japanese economy. Plus, against the background of coronavirus, business activity and demand are falling (and this process is accelerating).
What has already happened?
- March 3, the Central Bank of Australia lowered the interest rate by 0.25%
- March 3, the US Federal Reserve at an emergency meeting lowered rates by 0.5%
- March 4, Central Bank of Canada lowered rates by 0.5%
- Friday, March 6 - OPEC collapse +
- March 10 start of stimulus measures by ALL Central Banks of the world.
- March 11, the Central Bank of England at an extraordinary meeting reduces the% rate by 0.5%
What will happen soon
- The Fed will reduce the interest rate by 0.50% at a meeting on March 17-18 and again on April 28-29 - it will become zero.
- The ECB will reduce its rate by 0.10% and resume quantitative easing.
- The Central Bank of Canada at an extraordinary meeting will reduce the rate by 0.75%
- As a result of the rate-cutting process launched by the Fed, Japan and Europe suffer the most.
When Europeans and Japanese sell bonds, they take them home, which further drops the dollar, strengthens their currencies and creates problems in Japan and Europe:
- Forecast Value USDJPY 95.00
- Forecast value EURUSD 1,2000