The Sahm Rule might be a good indicator of a recession. But the timing of when the Bank of Japan unnecessarily hikes interest rates might be even better.
Until the events of recent days, Bank of Japan Gov. Kazuo Ueda had earned plaudits for unwinding the massive stimulus policies of his predecessor without spooking the markets. That praise now looks premature. In stark contrast to March, when the Nikkei 225 Stock Average tested new all-time highs as Ueda eased the country out of negative interest rates, his second hike on July 31 has been followed by a market bloodbath of almost unprecedented levels.
The rout extends far beyond Tokyo, and as my colleague John Authers has written, has more to do with what’s happening on Wall Street and expectations for the U.S. economy than anything specific to Japan. By late Monday in Asia, markets in Taiwan and South Korea had similarly bled, and the Nasdaq was set to follow.