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Central Bank is a special institution that supports the flow of money and financial systems of the country.
We aim to achieve stable economic and price by adjusting policy interest rates and funding.
In this article, we will organize the role of the central bank, the reason why the market is attracting attention, the impact on stocks, bonds and exchanges for beginners.
First Con まず
The central bank is like a command tower that adjusts the flow of money throughout the economy.
In Japan, the Bank of Japan and the United States play the role of the Central Bank.
While ordinary banks lend money to individuals and businesses, central banks move to動き the entire financial system.
The reason why investors focus on central banks is that the judgment of central banks is widely influenced by interest rates, stock prices, bond prices, and exchange rates.
However, the central bank does not directly determine the stock price.
It is basic to think that it is indirectly affecting asset prices through interest rates and market value.
What is Chuo Bank?
Central Bank is a special bank that supports the stability of currency and financial systems, which is responsible for the financial policy of the country and region.
The difference between ordinary banks is the extent that the other party is.
| Type | Main role | Main partner |
|---|---|---|
| General Banks | Deposits, loans and payments | Business |
| Central Bank | Financial policy, currency issue, financial system stability | Governments, financial institutions and markets |
The central bank acts as a brake when the economy is overheated and the price is too high, and it has a role to support when the economy is worse and the flow of money is weak.
In other words, the central bank is an institution that adjusts the economicセルelerator and brake.
Three roles of the central bank
The role of the central bank is different, but beginners can easily understand the following three:
| Function | 内容 | Investment |
|---|---|---|
| interest rate | Cal economics and price through policy interest rates | Stock Prices, Bonds and Exchanges |
| Send money | Issue banknotes and supply funds to the market | Improve financial market liquidity |
| Protect financial systems | funds to reduce credibility | Prevent market disruption |
interest rate
The most famous job of the central bank is the adjustment of the policy interest rate.
If the economy is overheated and the price rise is too strong, the central bank will consider interest.
On the other hand, if the economy is bad, and the consumption or investment is weak, the economy will be affected by interest.
| Interest Policy | Aim | Easy to get up |
|---|---|---|
| 利上げ | Inflation suppression, refrigerant overheating | Increased borrowing cost and reversed stock |
| 利下げ | Economic support, recovery of consumption and investment | Reduced borrowing costs and wind up stock |
Interest rates are widely affected by m gage, corporate financing, stock price, bond price, and exchange rate.
For this reason, the announcement of the Central Bank and the principal’s statement will be an important event for investors.
Send money
The central bank is also involved in the supply of currencies.
In Japan, the Bank of Japan will issue Japanese banknotes, i.e. banknotes.
However, it is not a simple story, “If you increase your money, it will be better.”
If the amount of money is too high, the price increases and the value of the currency decreases.
For this reason, the Central Bank carefully decides policies while looking at the situations of economics, price, and financial markets.
In addition to regulating policy interest rates, there are also financial mitigation measures that enable the market to buy national bonds.
Protect financial systems
The central bank has a role to protect financial systems.
The entire economy is confusing when banks break down chains or financial institutions can no longer borrow money.
Therefore, the central bank may資金 funds as the last lender at the time of crisis.
In general, financial institutions will merge funds.
However, if the financial crisis increases credibility, no one will lend money to the other.
The central bank in such a local context prevents the collapse of the financial system.
Why Investors Focus on Central Banks
The biggest reason why investors focus on central banks is that interest rates are the basis of asset prices.
When interest rate changes, corporate borrowing costs, bond yield, foreign exchanges, and investor returns will change.
Therefore, in one word of the central bank, the stock market and the foreign exchange market may move greatly.
Especially the market is sensitive to the following information:
- Change of policy interest rate
- Prospect for future interest and interest reduction
- Inflation
- How to view
- Message from the President
The market reads not only what we do now, but also what we do next.
Impact on the stock market
In general, interest reduction is added to the stock, and interest is easily negative to the stock.
| Contact | Impact on Shares | Reason |
|---|---|---|
| 利下げ | More | Expectations for lower borrowing costs and economic support |
| 利上げ | Negative | Increased borrowing cost and increased discount rate |
Low interest rates make it easier for companies to borrow funds, making capital investments and business expansion easier.
Therefore, the expectation for profit growth can be increased and the stock price may be driven.
On the other hand, in the interest section, the company's borrowing burden is increased, and the current value of future profit is low.
However, in the event that a corporate profit is increasing, the stock price may increase.
The most important thing is that the central bank is to raise and lower the interest.
Impact on the Bond Market
Central Bank's interest rate policy is also a major impact on the bond market.
The bond price and interest rate basically move in opposite direction.
Interest rate rise → Existing bond price is easy to fall
Interest rate drop → Existing bond price is easierWhen the interest rate rises, the yield of newly issued bonds increases.
The low interest rate bonds already issued will be relatively attractive and the price will be easier.
On the other hand, if the interest rate falls, the bond of the existing interest rate becomes attractive and the price becomes easier.
Please note that bonds may be considered as safety assets, however, that there is a risk of price ctuations due to interest rate ctuations.
Impact on Forex Markets
In the exchange market, the currency of the country with high interest rate tends to be easy to buy.
For example, if the U.S. continues the interest rate in Japan in the interest direction, the US dollar yield becomes relatively attractive, and the dollar high and yen is more conscious.
| Contact | Easy-to- exchange reaction |
|---|---|
| U.S. interest, Japan low interest rate | It is easy to get dollar high and yen low |
| U.S. Interest Expectations | It is easy to get dollar and yen |
| Increase market anxiety | It can move different from the interest rate difference |
However, the exchange rate is not determined by the interest rate difference.
Economic forecasts, trade balances, geopoli risks, and market value are also affected simultaneously.
Foreign exchange ctuations are related to the yen conversion return of overseas ETF and the performance of export companies and import companies.
Points to be considered for beginners
There is no need to follow the news of Central Bank.
For beginners, it is easy to understand by checking only the following three.
Policy Interest
The first thing to see is the direction or direction that the policy interest rate increases.
The market reacts strongly to future direction than the current interest rate level.
Inflation rate
When the price rises strongly, the central bank is less profitable and makes it easier to keep interest.
If the inflation falls on the other hand, it becomes more conscious to stop interest and lower interest.
Message from the President
Press conferences and statements are important messages to the market.
Investors will read the direction of the following financial policy from the general speech.
In particular, words such as "inflation warning", "striking reduction", "striking reduction" and "co ing financial mitigation" may change the way the market looks.
Common misunderstandings
Does the Central Bank operate stock price directly?
The central bank does not directly determine the stock price.
Actually, it will indirectly affect the stock price through interest rate, amount of money, and market value.
Therefore, it is not possible to explain all the stock price movements only by the central bank policy.
If you are interested, you should always have a high stock.
Not always.
Interests are more likely to catch up with shares on interest rates, but if the reason for interest falls is severe, the story changes.
In the event of anxious business performance, the share price may be lower even if the interest is lowered.
The important thing is to see why you lowered the interest rather than the interest itself.
Is it too difficult to see a central bank statement?
You don’t need to read any specialized text.
First of all, it is enough to be aware of whether the central bank wants to cool the scene.
Even if you have this point of view, you can easily see the link between interest rates, stock prices and exchange news.
How to use for beginners
Once you’ve seen Chuo Bank News, let’s organize it in the following order:
| Check | 見方 |
|---|---|
| What to do | Raise, lower interest, set up and fund |
| Why? | Inflation counter、s or spect、 support |
| What to do | Co ity of interest or suggest interest |
| Where to influence | Shares, Bonds, Exchanges, Loan Interests |
At first, it is important to read the attitude of the central bank rather than the detailed mechanism of policy.
I want to cool the scene → It is easy to become the interest direction
I want to improve the spect → it is easy to become a orientedThis simple way of view makes it easier to understand your investment news.
- Central Bank is a special institution that supports currency and financial systems
- Aiming for stability of economic and price by adjusting interest rate
- There is also a role to protect financial systems when crisis
- Great impact on stocks, bonds and exchanges
- In investment, the direction of policy interest and the dialect of the central bank are important It is important to check the interest and interest up to the reason
Understanding the central bank makes it easier to connect with interest rates, stock prices, bonds, and exchange news.
First of all, let’s focus on what central banks want to cool down and want to support.