In less than a week, Japan has completely upended the world’s expectations for its markets and economy.
The country was the darling of the financial world for over a year. Its weak currency pushed the stock market to record highs and rekindled inflation after decades. Then the Bank of Japan (BOJ) hiked rates last Wednesday and Gov. Kazuo Ueda indicated he intended to keep going, helping trigger a sharp rise in the yen and wild gyrations across the global markets. Traders and investors were forced to abandon strategies based on macro views that Japan’s currency would stay weak and interest rates wouldn’t rise too fast.
"Without a doubt this is absolutely new ground for markets. There’s soul searching everywhere now that we have a BOJ that seems hellbent on getting away from years of zero or negative rates policy,” said Stephen Miller, a consultant at Grant Samuel Funds Management and former BlackRock fund manager. "Japan is now at the center of emergent worries — across everything, stocks, bonds, yen, credit, everything.”