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Japan - The Financial Giant

After the USA if there is a financial giant that dominates the world but with a passive-aggressive approach then it is Japan. For the past 12 months, almost every country has witnessed an increase in interest rates and has come out of a negative or zero rate policy except Japan which still has a negative interest rate policy (NIRP) in place.

By looking at some data it might be further clear why Japan is a giant. The country is the largest foreign holder of US treasury bonds amounting to $1.07 Trillion and the second largest Forex Reserve holder at $ 1.23 Trillion. The count has many of its local banks finance large global infrastructure projects and even some of the global banks themselves.

Within Japan is the Bank of Japan ( Central Bank) the driver of this giant financial ship. And in a few weeks, this ship will have a new captain that is a new governor after 10 years.

This is a critical period for not only the local economy but the global one as well. As the new governor takes over, the market participants would eagerly await the first policy meeting scheduled in April. This would be important to see the communication regarding policy trajectory and bond yield control.

Any small changes in policy measures would increase the odds of exiting the current policy. This would result in higher bond yield and currency depreciation impacting the global financial world.


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