TOKYO – Central bank rate moves rarely get metaphysical. But the way global markets ignored the Bank of Japan’s first tightening step in 17 years has traders asking: If a rate hike falls in a forest and no one is around to hear it, does it make a sound?
Triggering this famous thought experiment was the last thing Governor Kazuo Ueda probably expected on March 19, the day the BOJ made its second pass at ending 25 years of zero interest rates. It ended its negative yield experiment by raising the policy benchmark to 0%-0.1% from -0.1%.
Rather than skyrocketing, as some predicted, the yen has since weakened to 34-year lows. Instead of surging, 10-year Japanese bond yields are even lower today. Why, investors everywhere want to know, did the BOJ’s big pivot make no sound in trading pits around the globe?