Just now, when the Japanese stock market was approaching the close, a nosedive came again. The Nikkei 225 index, which originally rose more than 3%, quickly fell during the closing period, and the index closed up only slightly more than 1%. The South Korean stock index also followed the Japanese stock market out of the high and fell slightly. It is worth noting that the previously heavily depreciated yen began to strengthen after 1:30 pm Beijing time.

So, what happened? This morning, the statement made by Masayoshi Amamiya, the deputy governor of the Bank of Japan, caused the yen to depreciate significantly. However, afternoon news showed that Masayoshi Amamiya, the deputy governor of the Bank of Japan, believes that even after interest rate hikes, Japan's real interest rates are still deeply negative, and the financial environment is still very loose. Moreover, he also said that concerns about the US economy have affected global markets. This statement seems to have been interpreted by the market as that the probability of Japan raising interest rates has not decreased, and the Bank of Japan has suspected of slapping the blame on the United States.

The oscillation of the Bank of Japan

Last week, the Bank of Japan raised interest rates to the highest level in 15 years and announced detailed information on slowing down large-scale bond purchases, taking another step towards gradually exiting a decade-long massive stimulus policy.

Bank of Japan Governor Haruhiko Kuroda said that if the economic and price trends conform to its expectations, the Bank of Japan will continue to raise interest rates, indicating that the Bank of Japan may steadily raise interest rates in the future. These hard-line remarks, coupled with last week's weak US labor market data, have raised concerns about the world's largest economy falling into recession, leading to a global market crash and a surge in the yen, and the Japanese Nikkei Average plummeted on Monday.

Later, this morning, Masayoshi Amamiya, the influential deputy governor of the Bank of Japan, said that the central bank will not raise interest rates during market instability and played down the possibility of raising interest rates in the short term. Masayoshi Amamiya said that if the violent market fluctuations in the past week affect the Bank of Japan's economic and price forecasts, as well as the possibility of Japan's sustained achievement of the 2 percent inflation target, then this will "apparently" change the Bank of Japan's hiking path.

When speaking to business leaders in the northern city of Hakodate, Masayoshi Amamiya said: "Since we have seen violent fluctuations in domestic and foreign financial markets, it is necessary to maintain the current loose monetary level." Masayoshi Amamiya said that the recent strength of the yen will affect the Bank of Japan's policy decisions because it alleviates upward pressure on import prices and thereby reduces the overall inflation level. These remarks are in stark contrast to the previous statements made by Haruhiko Kuroda.

This afternoon, there was another statement from Masayoshi Amamiya. He said that even after the interest rate hikes, Japan's real interest rates are still deeply negative, and the financial environment is still very loose. In a mildly raising interest rate environment, the Bank of Japan has the advantage of choosing the timing of interest rate hikes. Moreover, he also said that concerns about the US economy have affected global markets. A soft landing in the United States is possible but not 100% certain.

After this statement was issued, the Japanese stock market plunged at the close, and the Nikkei 225 index, which originally rose more than 3%, began to plummet, and the closing was only slightly up by more than 1%. Obviously, the Bank of Japan's vague and blame-shifting attitude still has a significant impact on the market.

Toru Suehiro, an economist at Daiwa Securities, said that Masayoshi Amamiya's comments were clearly dovish. Unless the market sentiment quickly rebounds, the Bank of Japan is unlikely to raise interest rates in September or October. But if concerns about a US economic recession subside before the end of the year, the Bank of Japan may raise interest rates in December.

Will the shock continue?

Judging from the performance of the Japanese stock market today, the market may be more inclined to "continue to fluctuate".

HSBC strategist said that there have been basically concerns of "triple strikes" in recent days, including the elimination of arbitrage trading, the monetization of artificial intelligence, and the prospect of a US recession. It is too early to buy now, but the fundamentals still have a wide range of support. Given negative wealth effects and tightening credit conditions, the biggest risk at present is self-triggered selling, which will ultimately lead to an economic downturn.

Kit Juckes, chief foreign exchange strategist at Societe Generale, said in a recent research report that large-scale arbitrage liquidation is underway. Many people cannot unravel the largest arbitrage transaction in history, and the biggest response in the foreign exchange market is still "reducing positions". Long positions of the Australian dollar, British pound, Norwegian krone and US dollar against the yen have all been reduced.

Galaxy Securities believes that currently, the short-term outlook for the Japanese stock market still faces certain downward pressure and is difficult to recover to the high level of 42,000 points. It is expected to maintain a volatile pattern after sufficient adjustment. In the medium and long term, the trend of the Japanese stock market is more dependent on changes in the fundamentals and still has some core support. However, the following risks should be noted. First, fluctuations in overseas markets; second, the pace of Japan's economic recovery may be slow, and structural problems that restrict Japan's economy will continue to exist, putting pressure on the Japanese stock market; third, if the Bank of Japan is more hawkish than expected in terms of timing or pace.

Editor/Emily