Key Takeaways from the Bank of Japan's Rate Hike
The Bank of Japan has raised interest rates by 0.25%, marking the highest level in 17 years.

Historically, this move led to a Yen-Carry trade in August 2024, causing a 600% spike in the $VIX and a 20-30% decline in equities.
However, there are two reasons why this rate hike may not be a significant concern:

Yen Short Float Has Peaked: According to CFTC data, the Yen short float peaked in July, indicating that traders had already begun deleveraging in anticipation of the rate hike.
A Stronger Yen Can Help Weaken the USD: With the USD $DXY at near 2022 levels, a rate hike by Japan can help strengthen the Yen against the Dollar. This, in turn, can help reduce the US trade deficit by making American exports more competitive.

Overall, while the rate hike may have historically led to market volatility, the current circumstances suggest that it may not have as significant an impact.

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