Original title: "The Effect of Japan's Interest Rate Hike" Zombie Enterprises Collapse: The Number of Bankruptcies This Year Exceeds 5,000, and the Debt Reaches 1.38 Trillion Yen"

Original Author: Editor Jr., BlockTempo

Against the backdrop of monetary easing policies being initiated by major economies around the world, including the United States, Europe, and China, the Bank of Japan has gone against the tide, not only ending the era of negative interest rates since 2007 in March this year, but also announcing another rate hike at the end of July, which led to a large number of arbitrage traders closing their positions and a sharp drop in the market.

And at the end of this month, from the 30th to the 31st, the Bank of Japan will hold another two-day monetary policy meeting, and the market is also paying close attention to whether Japan will choose to raise interest rates again this time?

Reuters: Japan's October rate hike is less likely

Against this background, Reuters reported on October 21 that the Bank of Japan may not be in a hurry to raise interest rates again at this month's monetary policy meeting. The specific reasons include:

· Bank of Japan Governor Kazuo Ueda previously said that it would take time to examine the risks of raising interest rates, such as uncertainty in the US economy.

· Japan's House of Representatives will hold an election on October 27, and the United States will also hold a globally watched general election on November 5, which will make the Bank of Japan choose a more cautious stance against the backdrop of such major events.

· If global economic growth slows or household and corporate confidence is insufficient, the Bank of Japan may also choose not to raise interest rates for the time being.

· If the yen fails to continue to depreciate, the cost pressure of imported goods in Japan will ease, and people's lives and prices will not be greatly affected, the central bank may 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 tend to the Bank of Japan will not raise interest rates this month, the Bank of Japan also indicated that if the economic and price trends are in line with its expectations, interest rate hikes will be inevitable, because Bank of Japan Governor Kazuo Ueda has already expressed his determination to promote the normalization of monetary policy.

Japan's interest rate hike may trigger a wave of corporate bankruptcies

Another change in market observation is that Japan's long-term monetary easing policy allows many companies to rely on low interest rates and the government to survive, but cannot make effective investments and employment, resulting in the 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 Tokyo Shoko Research, the number of bankruptcies of Japanese companies from April to September this year has exceeded 5,000 for the first time in nearly a decade. The debts of these bankrupt companies are as high as 1.38 trillion yen, or about 9.2 billion US dollars.

According to a research report by Lyon Securities, every 0.1% increase in the benchmark interest rate may increase the number of these zombie companies that use most of their profits to repay debts from 565,000 to about 632,000.

However, it is worth mentioning that the bankruptcy of these zombie companies may not be a bad thing for Japan, because their existence makes it difficult for new Japanese companies to obtain a good growth environment and labor mobility is not sufficient. In this regard, Nicholas Smith, a strategist at Lyon Securities Commenting: "We are not worried about unemployment in Japan. On the contrary, we are most worried about Japan's labor shortage." Original link

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