What are the factors driving stock price declines!

As a result of Governor Ueda holding a hawkish press conference, not only did the Nikkei Average crash, but it also caused stock depreciation around the world.

Does the Bank of Japan have enough influence to cause stock depreciation around the world? I think there are many people who thought that.

In countries where interest rates are high, such as the United States, it is necessary to pay a high interest rate when trying to directly raise US dollars.

However, like JapanIf it is a country with low interest rates, procure Japanese yen at a low interest rateYou can do it.

Therefore, hedge funds and institutional investors utilize the Japanese short-term financial market to raise Japanese yen at low interest rates.The raised Japanese yen is converted into dollars, and returns are accumulated by investing in risk assets such as US stocks.

Naturally, this transaction will promote the appreciation of the dollar and the depreciation of the yen. The existence of this carry trade was the main reason why the dollar yen rose to 162 yen. That's why the Japan-US interest rate difference was important.

However, like the Bank of Japan this timeA declaration to raise interest rates on the Japanese yen & a rapid dollar depreciation and yen appreciation event occurredWhat would happen if I did?

Losses due to exchange are greater than returns obtained from financial assets held, and it falls below the total amount of yen raised.

If that happens, it will not be possible to repay in the Japanese short-term financial market, so a reversal of the previous trend will occur.

In other words, risk assets such as stocks that have been purchased are sold and converted to dollars. Then, in order to repay Japanese yen, a trend of converting dollars into yen occurs. Not only will the trend of depreciation of the dollar and yen that originally occurred during this process accelerate, but stocks will also fall drastically.