Money will not leave Vietnam when Japan raises interest rates

Japan raises interest rates for the second time this year. Photo: Phuong Anh

The Bank of Japan's (BOJ) decision to raise interest rates sent shockwaves through the global economy as soon as it was announced. The yen rose to a seven-month high. The Nikkei stock index, after falling sharply on Monday, rebounded 10.23% today. This was the biggest one-day gain since October 2008 and the highest in terms of index points.

Asian stocks also recovered from yesterday's fierce sell-off. South Korea's Kospi index rose more than 3%. China's CSI 300 index was flat, Hong Kong's Hang Seng (China) rose 0.9%. Australia's S&P/ASX 200 index rose 0.41%.

Japanese Finance Minister Shunichi Suzuki said authorities are closely monitoring movements in the exchange rate. It should move in a stable direction and reflect economic fundamentals.

"It's hard to say what's behind the stock plunge," Finance Minister Shunichi Suzuki said, adding that the government is cooperating with the Bank of Japan (BOJ) and closely monitoring markets with a sense of urgency.

The BOJ is in a tougher spot, struggling to turn around credibly after its hawkish stance caused an unexpected plunge in the Nikkei index, according to Mizuho Bank analyst Vishnu Varathan.

Marketwatch news site commented that the recent surge in the Yen, combined with the BOJ's interest rate hike, has created a general sense of uncertainty for investors. It is not only in a few US or Japanese markets but also globally due to the interconnectedness.

The shake-up came partly from the other side of the globe when the US non-farm payrolls last week showed that the labor market data cooled faster than expected, raising concerns about the risk of an economic recession.

As for Vietnam, Mr. Barry Weisblatt David - Director of Analysis Department of VNDIRECT Securities Company - said that Japan's interest rate hike has very little impact. He said: "Japan is Vietnam's 6th largest export market. Most of Japan's investment in Vietnam is development assistance capital (between governments) or long-term FDI capital, such as SMBC's investment of 1.5 billion USD in VPBank. This capital flow is not sensitive to moderate currency fluctuations like the way ETF capital flows will react.

So yesterday's news is unlikely to cause much change in Japanese investment flows into Vietnam. I don't think global investors will leave Vietnam for Japan just to get an extra 25 basis points of Yen interest rate."

In the first 7 months of this year, Japan remained in the top 5 largest FDI investors in Vietnam with 991.5 million USD. Of which, the manufacturing and processing industry accounted for 50% of the total investment capital of Japanese enterprises in our country.

Due to the decline of the Yen, the number of Japanese FDI enterprises investing in Vietnam has also been affected. However, according to Jetro representatives, this is only a short-term trend. 70% of Japanese enterprises operating in Vietnam are in need of expanding their production scale with new business models and activities. In the first half of this year, the number of newly licensed projects decreased by 20%, but the investment amount of long-standing enterprises tended to increase.

Source: https://laodong.vn/kinh-doanh/dong-tien-se-khong-roi-viet-nam-khi-nhat-ban-tang-lai-suat-1376865.ldo