UPSC-Relevant News Items

1. Bank of Japan Hikes Interest Rates, Threatening Yen Carry Trade and Indian Borrowers

Page: 11

Summary:

• • The Bank of Japan (BoJ) raised its benchmark interest rate to a 30-year high of 0.75%, ending decades of ultra-loose monetary policy.
• • The hike, driven by domestic inflationary pressures and a weak yen, threatens to unwind the highly profitable global yen carry trade, potentially leading to capital repatriation and global market volatility.
• • The decision signals a significant retreat from the long-standing Yield Curve Control (YCC) framework, inducing volatility in Japanese Government Bond (JGB) markets.
• • Indian PSUs and infrastructure companies with unhedged yen loans face increased repayment costs and foreign exchange losses due to potential yen appreciation, increasing corporate risk.

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