The Bank of Japan causes inflated stock markets to collapse. What's next?

A fall in global stock markets that started in Japan forced speculators to turn to cash, which will probably be directed to cryptocurrencies. Many will go broke, Russia will be affected at the very minimum.

Photo: flickr.com by Yasuhiro from Tokyo, Japan is licensed under Commons, the free media repository

The Bank of Japan crashes stock markets

Global markets went down sharply yesterday evening after indices of the Japanese stock exchange dropped by 13 percent, which was the biggest decline since 1987.

Shares of Japanese banks fell by 20 percent in a few days. Japan's Nikkei stock index lost more than 3,000 points during trading. Trading sessions in Japan, in South Korea and Turkey were halted. The American stock market lost $2.9 trillion in capitalization yesterday. Nvidia shares fell by 10 percent, whereas shares of Tesla, Apple, Microsoft, Google declined by 12 percent and Amazon — by 10 percent.

Bitcoin has also fallen by 13.4 percent to $50,470, which marked the largest decline in the most popular cryptocurrency since February 2024.

The root cause of all that was the decision of the Bank of Japan to raise interest rates above zero for the first time since 2007, by 0.25 percent. The decision was made to curb the sharp decline of the yen against the US dollar, which leads to higher import prices for everything that is already expensive in Japan — oil and food.

BoJ Governor Kazuo Ueda told reporters that more rate hikes could follow this year to curb inflation.

The yen used to be a lifesaver for speculators. They would borrow in yen for next to nothing (0-0.1 percent) and buy any profitable asset outside Japan. However, those would be assets in foreign currencies, whereas loans would be denominated in the yen. The yen index has risen by ten percent in the last two weeks. Therefore, whoever borrowed yen now has to pay back ten percent more, and they will have to pay back even more in the future.

These factors have forced many players to sell their stocks and buy back yen to pay off their loans. The demand for the Japanese currency is pushing it even higher, which leads to more sell-offs and more pressure on the yen.

The Bank of Japan was a piggy bank for global assets, an endless "glitch" in the monetary system that investors could use to create huge leverage. Speculators can only switch to cash now.

More factors for stock markets to collapse

Analysts also believe that investors sell off shares in anticipation of Iran's attack on Israel.

Another reason is that everyone is afraid of a recession in the United States. Washington reported a rise in unemployment to 4.3 percent in July, the highest level in almost three years.

Where will the withdrawn cash go?

USA's leading speculator Warren Buffett sold Apple shares worth a record $76 billion. This accounts for 49 percent of shares in his portfolio. Cash assets on the balance sheet of his company Berkshire Hathaway have grown to a record amount of $277 billion. According to Bloomberg and CNBC, the number of securities has dropped by almost 50 percent. Buffett is known for profiting from declining shares while dealing for rise. He could afford this expectation. If he cashed such money, one shall assume that risks are too high even for Buffett.

Globalists are withdrawing real money from inflated stocks. What are they going to do with all this money? Donald Trump promised to make the United States the crypto capital of the world. The Americans will continue their development in the direction of the crypto market. Even the Central Bank of the Russian Federation has started regulating this market.

Stocks and cryptocurrencies are not physical gold. In fact, they are just fiction that can be "turned on and off" when needed.

The current crisis is not going to affect Russia much. Financial analyst and investor Evgeny Kogan said that the Russian stock market lost about 2.5 percent following the decline of global markets.

"One should not expect the Russian market to follow global markets. The Russian market is still isolated," Kogan believes. According to Kogan, the Russian market will move to an upward trend after overcoming the peak of the Central Bank rate.