Bank of Japan head Kazuo Ueda has stressed that interest rates will rise if economic and inflation expectations are met. In a document submitted to the government, he said that economic conditions remain favorable and the real interest rate is negative. These statements have strengthened the value of the Japanese yen and weakened the value of the U.S. dollar. Rising interest rates in Japan pose a challenge to risk assets as the U.S. Federal Reserve and other central banks are likely to cut rates. This could lead to a strengthening of the yen and a sell-off in risk assets. Arthur Hayes, former co-founder of BitMEX, warned that the risk of yen carry trades disappearing could disrupt the market unless central bank money printing increases. Interest rates in Japan have remained zero for more than two decades, prompting investors to use the yen to invest in high-yielding assets.
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