Title: [Global Markets] Entering the BOJ 0.75% Rate Era and Checking Yen Liquidity Reorganization amid the US-Europe-Asia Tri-Polar Decoupling
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Today, we will objectively examine the impact of the Bank of Japan (BOJ) reaching a 0.75% policy rate, following the end of its Yield Curve Control (YCC) policy, on global liquidity and the fundamentals of the three major economic poles (US, Europe, and Asia) using data.
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Core Summary
After lifting negative interest rates and abolishing YCC in 2024, the Bank of Japan (BOJ) has maintained its policy rate at 0.75% as of 2026 through continuous monetary policy normalization.
With the US maintaining monetary tightening amid solid fundamentals, Europe seeking economic stimulus, and Japan withdrawing liquidity, the policy decoupling among the three global poles (US, Europe, and Asia) is intensifying.
Japan's interest rate hikes and reduced government bond purchases are stimulating the liquidation risk of yen carry trade funds invested in global asset markets, serving as a major test for the fundamentals of emerging markets, including Asia.
Current Situation Summary
As of the close on May 23, 2026, major domestic and international stock markets and exchange rate indicators fully reflect the impact of the conflicting global macroeconomic environment.
The KOSPI index closed at 7,847.71, the KOSDAQ index at 1,161.13, and the NASDAQ index recorded 26,451.85.
In the foreign exchange market, the USD/KRW exchange rate rose to 1,517.00 won, indicating a strong dollar and expanding volatility in the yen and other major Asian currencies.
According to the proprietary Fear & Greed Index compiled by Daily Stock, both major markets have entered a neutral phase in terms of momentum and volatility.
The KOSPI Fear & Greed Index is currently Neutral (57.3), gradually cooling off from Neutral (58.9) a week ago, Greed (64.8) a month ago, and Greed (63.4) three months ago.
The NASDAQ Fear & Greed Index is also currently Neutral (58), showing somewhat eased volatility compared to Greed (63.2) a week ago, Greed (68.5) a month ago, and Greed (66.8) three months ago.
An index rise does not automatically mean a state of blind greed; the current figures are objective results reflecting complex technical indicators such as RSI and momentum.
Financial Analysis
The normalization of monetary policy by Japan's central bank is having a direct financial impact on funding costs in global bond markets beyond the Japanese Government Bond (JGB) market.
Under the previous YCC regime, massive capital utilizing Japan's ultra-low interest rates flowed into US Treasuries and European assets.
However, as long-term Japanese government bond yields, such as the 10-year and 30-year notes, hit multi-decade highs, the possibility of Japanese funds returning home (reshoring) is being raised.
This phenomenon could act as pressure on the financial soundness of foreign exchange reserves in emerging Asian countries.
Higher yen funding costs lower the interest coverage ratio of companies within the Asian region, and the relative currency depreciation against the dollar can exacerbate external debt repayment burdens.
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Valuation
Global PMI indices and policy divergence among major central banks (Fed, ECB, BOJ, PBOC) are leading to differentiated valuation premiums across the tri-polar stock markets.
The US stock market maintains a historical valuation premium based on strong corporate earnings and dominance in the AI industry.
Conversely, the European stock market is seeing relative appeal highlighted mainly in undervalued value stocks and consumer goods, thanks to expectations of preemptive interest rate cuts by the ECB.
For Asian stock markets, the valuation of Japanese export stocks, which previously benefited from a weak yen, is being tested due to the BOJ's hawkish pivot.
The fundamental decoupling within Asia, where China's (PBOC) accommodative stance and Japan's tightening intersect, is a key variable determining the direction of foreign supply and demand in the domestic KOSPI market.
| Category | Monetary Policy Stance | Macro Fundamental Characteristics | Valuation Appeal |
|---|---|---|---|
| **US** | Fed high rates for longer | AI-led growth, solid consumption | Overvalued (Tech premium maintained) |
| **Europe** | ECB preemptive cut expectation | Defending manufacturing slowdown & attempting recovery | Neutral (Value stock-focused defense) |
| **Asia (Japan)** | BOJ rate hike (0.75%) | Import price pressure & rate normalization | Revaluation (Relative strength in financials) |
| **Asia (China)** | PBOC stimulus easing | Defending domestic demand slump & providing liquidity | Undervalued (Dependent on policy momentum) |
Expert and Institutional Analysis
Global investment banks and experts analyze that the Bank of Japan will closely monitor global raw material price trends when executing additional interest rate hikes.
In particular, rising international oil prices due to Middle East instability and the strength of key raw materials like copper are cited as factors stimulating import prices within Japan.
This forces the Bank of Japan to face cost-push inflation pressure even before confirming real wage growth rates and settling its inflation target (2%).
Experts maintain a conservative view on whether the Japanese economy, amid demographic structural limits, can indefinitely tolerate long-term rates breaching specific resistance lines.
They warn that if monetary tightening proceeds at a pace exceeding market expectations, rapid capital outflows could occur in stock markets of neighboring Asian countries.
Risk Factors
The biggest risk factor is supply chain disruptions caused by prolonged geopolitical conflicts and the linked bottleneck in global liquidity.
Asian countries with high dependence on energy and raw material imports will suffer a double blow of worsening current account balances and currency depreciation when oil prices spike.
Under these circumstances, if the BOJ rushes a more hawkish tightening than expected to defend prices, abnormal yen volatility could burden the entire global stock market.
Furthermore, if capital outflows from global bond indices overlap, there is a persistent risk that interest rate spreads among major countries will widen unstably.
Therefore, domestic investors facing the historic exchange rate level of 1,517 won must be especially prepared for external liquidity shocks.
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Investment Perspective Summary
The Bank of Japan's monetary policy normalization phase suggests a structural change to the global era of 'cheap liquidity' that has lasted for over a decade.
The tri-polar decoupling phenomenon, where US, European, and Asian stock markets move independently according to their respective policy stances and fundamentals, is highly likely to become entrenched for the time being.
Domestic stock market investors should incorporate the scenario of temporary foreign supply outflows during the global fund rebalancing process into their portfolio management.
A valid strategy appears to be adjusting asset weights toward sectors that stably generate free cash flows (FCF) even in an environment of higher global funding rates, rather than heavily overvalued theme stocks.
Investor Checkpoint Q&A
Q1. Why is it important that the Bank of Japan's (BOJ) policy rate reached 0.75%?
It signifies the end of the zero and negative interest rate era that served as a global funding source for a long time, creating an incentive for Japanese capital parked overseas to return home.
Q2. What exactly is the US-Europe-Asia tri-polar decoupling?
It refers to the divergence in economic and monetary policies across regions, such as the US delaying rate cuts, Europe rushing cuts to prevent recession, and Asia (Japan) conversely raising rates.
Q3. How is Japan's monetary policy related to global raw material prices?
Middle East-driven oil price hikes or surging copper prices can increase import costs for resource-poor Japan, acting as a key trigger that forces the BOJ to intensify its tightening.
Q4. How does the yen carry trade liquidation risk negatively impact the domestic stock market?
When funds that borrowed yen at low interest rates to invest in high-yield assets in emerging markets like South Korea enter a repatriation phase, mechanical foreign capital outflows could occur, particularly in large-cap KOSPI stocks.
Q5. Why is the Fear & Greed Index neutral when the KOSPI index has risen significantly?
The Fear & Greed Index does not judge greed simply by an absolute rise in the index; rather, it indicates a 'Neutral' state where overheating has cooled off, comprehensively reflecting technical factors like slowing short-term price momentum, RSI, and reduced volatility.