JAPAN RAISED THE PRICE OF MONEY TO 1.25 PERCENT — AND THE YEN GOT WEAKER, NOT STRONGER

A central bank that means it raises rates and the currency goes up. Japan raised rates and the currency went down. That is the whole story on September 18. The Bank of Japan lifted its overnight rate target to around 1.25 percent, up from around 1.0 percent, and the yen did not thank it — it sagged toward 156.75 to the dollar in the first hour, about half a percent weaker, and traders have spent the week pressing it toward 158.

Read it plainly. Higher rates are supposed to make a currency scarce and dear. When a rate hike buys a cheaper yen instead, the market is telling you it does not believe 1.25 percent keeps up with the money printing behind it. Seven members voted yes, two voted no; even the yes was not a promise of the next step. So the traders who front-ran a real tightening cycle took their money back.

Japan has told the world for a generation that low rates were a temporary favor. This is the loudest that promise has ever been said out loud, and the yen still fell. A day earlier we noted Japan’s 30-year bond now pays about what a US six-month bill pays — the carry is thin and the duration is long. Raise the price of money by a quarter point and the arithmetic underneath does not move. At the time of this writing, bitcoin was $78,107.