The 'Japanese Interest Rate Hike Effect' - Zombie Companies Collapse: The number of bankruptcies this year has exceeded 5,000, with debts reaching 1.38 trillion yen.

The Central Bank of Japan is expected to hold a monetary policy meeting again at the end of this month. The outside world is currently closely following whether Japan will continue the policy from July and announce another interest rate hike. However, a recent report from Reuters indicated that the probability of the Central Bank of Japan raising interest rates again this month is not high. In the context of major global economies such as the United States, Europe, and China implementing loose monetary policies, the Central Bank of Japan has gone against the trend. Not only did it end the era of negative interest rates since March this year, which has been in place since 2007, but it also announced another interest rate hike at the end of July, leading to a large number of arbitrage traders closing positions and a big dump in the market at that time. From the 30th to the 31st of this month, the Central Bank of Japan will hold a two-day monetary policy meeting, which is also being closely followed by the market. Will Japan choose to raise interest rates again this time? Reuters: The probability of an interest rate hike in Japan in October is small. In this context, a report from Reuters on October 21st pointed out that the Central Bank of Japan may not be eager to raise interest rates again at this month's monetary policy meeting for specific reasons, including: The Governor of the Central Bank of Japan, Haruhiko Kuroda, previously stated that it is necessary to take time to assess the risks of raising interest rates, such as the uncertainty of the U.S. economy. The Japanese House of Representatives will hold an election on October 27th, and the United States will also hold a highly anticipated election on November 5th, which will lead the Central Bank of Japan to take a more cautious stance against the backdrop of such major events. If the global economic growth slows down, or if there is insufficient confidence among households and businesses, it may also lead the Central Bank of Japan to choose not to raise interest rates temporarily. If the yen fails to continue depreciating, the pressure on the cost of imported goods in Japan eases, and the lives of the people and prices are not significantly affected, the Central Bank may also not raise interest rates. Finally, most experts also believe that Japan will not raise interest rates again this year, and even if it does, it will have to wait until the end of 2025 and the beginning of 2026. However, it is worth noting that although many factors currently lean towards the Central Bank of Japan not raising interest rates this month, the Central Bank of Japan has also indicated that if the economic and price trends meet its expectations, an interest rate hike will be inevitable, because Governor Haruhiko Kuroda has already expressed his determination to advance the normalization of monetary policy. Another change observed in the market is that Japan's long-term loose monetary policy has allowed many companies to rely on low interest rates and government support, but has not been able to make effective investments and employments, leading to a proliferation of zombie companies in Japan. Since the end of the era of negative interest rates in March this year, according to a report released earlier this month by the Tokyo Shoko Research Institute, the number of bankruptcies of Japanese companies from April to September this year has exceeded 5,000 for the first time in nearly ten years, and the debts of these bankrupt companies have reached as high as 1.38 trillion yen, approximately 92 billion U.S. dollars. According to a research report by Societe Generale, for every 0.1% rise in the benchmark interest rate, the number of these zombie companies that mostly use their profits to pay off debts may increase from around 565,000 to around 632,000. However, it is worth noting that the bankruptcy of these zombie companies may not be a bad thing for Japan, because their existence has made it difficult for new businesses in Japan to obtain a good growth environment, and labor mobility is not sufficient. In response, Nicholas Smith, a strategist at Societe Generale, commented: We are not worried about Japan's unemployment problem. On the contrary, what we are most concerned about is the shortage of labor in Japan.