General discussion, page-11689

A few weeks ago the analysts were espousing how strong the US economy was and now blaming a looming recession for the market decline. As your post may be inferring, the recent falls are not so much to do with recessionary fears but more to do with unwinding of Japanese cross trades.

Investors borrow trillions from Japan at near 0% and invest offshore to earn at a higher rate. Japan started to slightly jack up interest rates a week ago which pushed the Yen about 10% higher against the US. All of the sudden the Japanese investors who have invested offshore in $US owe 10% more than they did before and with the double whammy of higher Japanese interest rates albeit small increase, it has created a bit of panic as these investors try to unwind their positions. They are invested globally and not just in the US so has triggered widespread panic. The stronger yen has contributed to Japan's share market dropping a massive 12.4% in a day and over 30% over a week or so. Their worst fall since the big one in the eighties. Globally things should settle before too long IMO and there could be an emergency rate cut in the US which could also help get things back on track.