Stock markets plunged late ebruary. E eryone is granted to say that e erything had started in Shanghai; e eryone was relie ed when the turbulence are resol ed without causing a widespread collapse. In both cases, e eryone was wrong.
irst o all, it is in Tokyo that began in Shanghai and not. Or, more accurately, it is in Tokyo that the huge amounts o snow at the origin o the a alanche began to pile up. Because it was a a alanche and it can really stop when the orce that triggered it will lost all its power. And when all these amounts o snow ell on Tokyo will ha e been absorbed. What will happen when the Japanese interest rates will return to more normal le els.
The money le t the declining stock markets or those who are registering increases. This change o centre o gra ity corresponds to these operations o "carry trade" in yen which talking so much these days. They ha e caused the displacement o ast amounts o money in the world. Some ha e meet in Shanghai, a ter ha ing borrowed the tortuous channels today allows the complexity o the inancial world. Packages o hard snow accumulated in many places, the New Zealand God knows where yet. Most could be mo ed at any time. The entire structure was ready to collapse. This is the case. There are also o the signs that the operations o "carry trade" Yen resumed. Streamers thus begin again to cross the mountains, while it is still to e aluate and repair the damage caused by the latest storm.
To the extent these alls o snow a ect only the Japan but has also be allen international markets, the risk o new a alanches remains. The extremely low le el o the Japan interest rates plays a major role in global inancial stability. It is there ore justi ied that the Bank o Japan is seeking to raise rates. No doubt this is hardly the time to be too concerned by the e olution o prices on the national plan. Central banks are the keepers o the stability o prices and this applies to the prize money or the goods. I the rent o money an abnormal le el, this situation has implications that go well beyond that re lect simple indicators o in lation. One might ery well say that in these times o globalization, the de inition o an in lation target allows central banks play ostrich. It should not allow them to use this type o escape.
Stock shock coming to occur also highlighted another anomaly: the low le el o the yen, which lasts or a long time. The collapse o the markets it howe er quickly corrected. Un ortunately, with the resumption o the "carry trade", this correction will be short-li ed. In the Japan, many people who think it's a good thing and are relie ed to see the yen remain low, allowing a restart o export-led growth. It is clear that the ery low interest rates and the weakness o the yen helped economic reco ery obser ed lately. Howe er, assert that need to maintain these two supports in place long-term is ully aberrant. A reco ery that must rely on abnormal actors to endure is hardly satis actory. The Japanese economy needs to know i it can mo e orward without the help o these two anomalies. These support will remain in place, it will be di icult to do without.
It is also why the Bank o the Japan is seeking to normalize interest rates. It is regrettable that any inter ention is now politicized in the extreme, but this does not mean that it can wai e this return to normalization. The Japan must recti y de ects he created. The international economy will remain otherwise always threatened by a new a alanche and the Japanese economy will remain in alid at all e er. None o these situations is acceptable. None can maintain long-term nor.