Capital Economics: The impact of the Bank of Japan's interest rate hike on global markets may be overstated.

On December 2, the possibility of the Bank of Japan raising interest rates earlier than expected shocked global bond and stock markets, but Capital Economics stated that this concern may be exaggerated. Analyst Thomas Mathews wrote that Japan is a major global creditor, but rising Japanese bond yields do not necessarily mean that it will trigger capital inflows, thereby posing risks to global markets.
On one hand, Japanese investors looking at foreign bonds face the cost of hedging short-term foreign exchange risks. On the other hand, even if rising Japanese bond yields put pressure on bond markets in other regions, this will not undermine the rebound of global stock markets, as the rebound in global stock markets is based on profit growth rather than higher valuations. This situation is likely to persist. (金十)