A negative interest rate is a positive rate but presented on a negative scale. No difference exists between both a negative or positive number. Both are the exact same numbers. Today’s post was prompted by this statement from a market person, The BOJ will disregard negative interest rates and turn positive. BOJ interest rates are already positive but presented as negative rates.
The BOJ will not change the negative scale arrangement. To change the appearance of negative to positive would completely undermine the entire JGB yield curve, YCC and BOJ bond purchases and sales. Tona and Call rates would completely change as well as the new 2016 BOJ economic arrangements. The arrangements to the entire economic system is based on negative interest rates.
What levels USD/JPY would trade if a presentation change occurred is unknown but the Import and Export lines would surely undergo a radical metamorphosis.
As a sidebar, I’m working further with interest rate numbers and finding much easier and faster ways to factor trades. Much has changed since 2016 and further revamps to 2022.
BOJ. Only went 2 days as no need to travel further. Negative turned positive = 0.974. Positive = 0.973. No changes but only in the presentation.
Day 2. Negative turned positive = 0.973. Positive = 0.972. No changes but only in the presentation.
The BOJ set of interest rates is no different from any central bank as all the numbers are the exact same and perform the exact same operations to markets and Market trading on any financial instrument.
Danske Bank. Why didn’t USD/JPY drop last week. Because the BOJ stopped USD/JPY’s fall and they did it everyday last week by adjusting interest rates.
Never forget this concept to all central banks: the floor and ceiling to interest rates.
The ECB;s Eonia rate was negative then positive Ester was replaced. Eonia was the Floor to interest rates and EUR/USD. Upon the Ester Introduction, Ester became the interest rate top and top for EUR/USD.
Ester now trades miles above previous Eonia. So can the BOJ go positive. No way.
Brian Twomey
Tianzuida ON TRADING 