Japan - August 07, 2024

Japan's central bank interest rate hike, together with fears over a possible recession in the U.S. economy, has unsettled the country's securities and foreign exchange markets, said Hideo Kumano, Chief Economist of the Economic Research Department under the Dai-ichi Life Research Institute.

The Bank of Japan announced at its monetary policy meeting on July 31 that it would increase the interest rate to 0.25 percent from the previous range of zero to 0.1 percent, marking the first rate hike since the bank ended its negative interest rate policy in March.

Although bank governor Kazuo Ueda claimed that the current increase in policy interest rates would not have a significant negative impact on the economy, Hideo Kumano noted that it still caused shocks and fluctuations in the market.

The Tokyo stock market saw a panic selling on Monday, with the country's benchmark Nikkei Stock Average logging its largest single-day point drop in history. Meanwhile, the sharp appreciation of the yen dealt another blow to Japanese stocks.

Industry insiders believe that the reason for the Tokyo stock market's fluctuations is primarily the United States, as the U.S. economic data have stoked recession fears, leading to a significant overall weakening of the U.S. dollar against major global currencies.

Kumano further explained that the Japanese stock market is highly correlated with the U.S. stock market, the current fluctuations in the Japanese securities market and foreign exchange market also reflect the public concerns over the U.S. economic outlook.

Shotlist:
Tokyo, Japan - Aug 7, 2024:
1. Japanese national flag;
2. Various of traffic, pedestrians at crossroad;
Tokyo, Japan - Aug 7, 2024
3. SOUNDBITE (Japanese) Hideo Kumano, Chief Economist, Economic Research Department, Dai-ichi Life Research Institute (partially overlaid with shots 4-5/ending with shot 6):
"Although the interest rate increase by the Bank of Japan was insignificant, it triggered a huge chain reaction such as the appreciation of the yen and a decline in the stock market. Therefore, I think the interest rate increase has actually caused a major impact on the markets. Nevertheless, I don't think the Bank of Japan will halt the interest rate normalization process. It announced at the press conference on July 31 that it will continue raising interest rates as planned if the inflation rate remained above 2 percent as expected, although the specific timing has not been announced.";
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FILE: Tokyo, Japan - June 16, 2022
4. Various of exterior of Bank of Japan;
5. Various of signs of Bank of Japan
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FILE: Tokyo, Japan - Date Unknown
6. Aerial shots of cityscape, buildings;
Tokyo, Japan - Aug 7, 2024
7. SOUNDBITE (Japanese) Hideo Kumano, Chief Economist, Economic Research Department, Dai-ichi Life Research Institute (partially overlaid with shots 8-9):
"The Japanese stock market is currently among the most volatile stock markets globally, with a high degree of correlation to the U.S. stock market. One reason behind the large fluctuations is believed to be the impact of exchange rates. When stock prices decline, the yen tends to appreciate simultaneously. The simultaneous drop in stock prices and appreciation of the yen has led to a deteriorated performance of Japanese export companies, which has further depressed stock prices. The exchange rate between the Japanese yen and the United States dollar is currently still fluctuating without a clear stable point. Behind the fluctuations lie the ongoing concerns about the U.S. economic prospect. If the U.S. economy weakens after the autumn, it will also have a negative impact on the Japanese economy.";
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FILE: Tokyo, Japan - Date Unknown
8. Various of Japanese yen notes going through bill counter;
9. Various of Japanese yen banknotes on counter;
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10. Buildings, traffic;
11. Pedestrians.

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