The Bank of Japan finally ended an eight-year experiment with negative interest rates that has left more than $4 trillion in funds hunting for higher returns abroad. What comes next threatens to shake up money flows in Japan and across the world.
One of the biggest questions is what happens to that big ball of money stashed overseas in assets including US government bonds, European power stations and Singapore equities. So far, markets have taken Japan’s first interest-rate hike since 2007 in stride, as the yield differential still remains wide with other major economies. The yen even weakened slightly, with traders citing the BOJ’s promise to keep conditions accommodative as a sign there won’t be rapid tightening ahead. But the longer term effect is less certain.
