Ueda hospitalized, Uchida steps in: Next week's 45-minute press conference may determine the market trend for the second half of the year.

```

The scenes after the opening of the Tokyo stock market on August 5, 2024, still haunt traders with nightmares.

The Nikkei 225 Index plummeted 12.4% in a single trading day—the most severe one-day crash since Black Monday in 1987. Seoul’s KOSPI triggered circuit breakers and halted trading. Chicago’s VIX soared to 65, with trillions of dollars wiped out across the Asia-Pacific markets within 48 hours.

The trigger was a 25 basis point rate hike by the Bank of Japan.

Now, 22 months have passed. The BOJ is about to raise rates by another 25 basis points, pushing the rate to 1%—the highest since 1995. CFTC data shows net yen speculative shorts have reached $10.1 billion, exactly the same level as before the stampede in July 2024.

But this time, the real tension isn’t the rate hike itself. Forty-nine out of forty-nine economists predict the hike, so there’s zero suspense.

The unsettling thing is: After this hike, it isn’t Kazuo Ueda standing at the press conference microphone.

With Ueda absent, who will "translate" this rate hike?

On June 10, BOJ governor Kazuo Ueda was hospitalized due to an infected liver cyst, expected to last two weeks. He will miss the June 15-16 policy meeting—not attending, not voting, not chairing discussions, only submitting a written opinion.

This is the first time since 1998 a BOJ governor has missed a policy meeting.

The substitute arrangement is also unprecedented: Deputy Governor Ryozo Himino will chair the meeting discussion and voting, while Deputy Governor Shinichi Uchida will host the post-meeting press conference. Two deputy governors share one governor’s role—something the BOJ has never done.

For the market, the rate hike resolution paper isn’t important—everyone knows it’ll say “Raise rates 25bp to 1%”. What matters is the forty to fifty minutes of Q&A at the press conference.

The real information at central bank press conferences is never in the statement text, but in the governor’s phrasing, tone, pauses, facial expressions, and the subtle responses to sharp questions like “Will there be more hikes?” Investors have spent three years learning how to decode Ueda’s communication signals.

Now, the codebook has changed hands.

Shinichi Uchida: Last time he appeared, he was putting out fires

Shinichi Uchida has a clear label in market memory: dovish firefighter.

On the third day after the Nikkei’s crash on August 5, 2024, Uchida was the one who provided key reassurance. He said something that immediately stopped the slide and triggered a rebound: “In times of financial market instability, we will not raise rates.” This statement pulled the Nikkei 225 back from the abyss within 48 hours.

The market remembers two things: Uchida is dovish, Uchida can extinguish fires.

But his role on June 16 is completely different. He’s not here to put out fires—he’s here to “explain” an already decided rate hike. Reporters will ask him: Will there be another hike by year-end? Is 1.25% already the path? How do you assess downside risks?

If Uchida’s answers are more dovish than Ueda’s usual tone—for example, hinting “not urgent to hike further”—the market will immediately face an unanswerable question: Is this Uchida’s personal style, or a shift in BOJ policy?

Bloomberg used a precise phrase in its report: “Adds a layer of ambiguity.”

There’s another rarely discussed factor: Uchida has just been discharged from hospital after leukemia treatment last month. A press conference lasting almost an hour, facing sharp questions from global financial media, will be a test of his physical and mental stamina.

Positions are back, but the safety cushion is half as thick

CFTC net yen speculative shorts: $10.1 billion. This figure itself is an alert.

The last time positions were at this level was late July 2024—after which the Nikkei suffered its biggest single-day crash since 1987.

But the CFTC data is just the tip of the iceberg. It only covers exchange-traded futures, a small piece. According to BIS, total yen swap market volume against other currencies is about $14 trillion. Morgan Stanley estimates about $500 billion in arbitrage positions still exist. BCA Research is more direct—they call yen carry trades a “ticking time bomb.”

But position size is only half the story. The more critical change is in the safety cushion.

In mid-2024, the US-Japan rate spread was 515 basis points. At that spread, doing carry trades, yen would have to appreciate by over 4% a month to wipe out a whole year’s carry returns. Now the spread has narrowed to 275 basis points (after hiking to 1%), and yen only needs to appreciate 2.8% a month to wipe out annual returns.

The profitability logic of carry trades hasn’t changed—275bp positive carry is still attractive. But the margin for error is almost halved. The same degree of yen appreciation that was just an “uncomfortable drawdown” in 2024 might directly turn into losses in 2026.

If 79% of economists are right (another hike to 1.25% by year-end), the spread narrows further to 250bp; the safety buffer gets even thinner.

Will August 2024 repeat?

The market’s biggest fear is a “repeat of August 2024.” But fear aside, breaking down the conditions rationally, the conclusion isn’t so extreme.

The stampede in August 2024 required three simultaneous conditions:

First, the hike was unexpected. On July 31, 2024, BOJ hiked 25bp; market expectations were split, and the hawkishness exceeded forecasts. Ueda’s tough language at the press conference amplified the shock. Today, this condition isn’t met—49/51 economists expect a hike, OIS market has fully priced it in.

Second, US economic data signaled recession at the same time. On August 2, 2024 (two days after the BOJ hike), US nonfarm payrolls missed badly—up only 114,000 (expected 175,000), unemployment rate rose to 4.3% triggering the Sahm rule. In one trading day, the narrative switched from “BOJ surprise hike” to “global recession panic.” Two bouts of panic stacked together, and the stampede got out of control. Today, this condition also isn’t met—May NFP was 172,000, well above the expected 85,000, and the labor market remains solid.

Third, carry trade positions were highly concentrated with little hedging. BIS analysis showed high leverage, little hedging in 2024, margin calls triggered self-reinforcing sell-offs. Today this condition is partly met—CFTC positions are back to previous levels, but after the 2024 stampede, some institutions have increased hedging and the structure may be more dispersed.

Only about one of the three conditions is met. The chance of fully repeating August 2024 is low.

But that doesn’t mean the risk is zero. The lesson from August 2024 isn’t just “what happens when all three conditions are met,” but also “in a high position environment, a single communication mishap can trigger partial unwinding, which can reinforce itself.”

Today’s risk has morphed: Press conference uncertainty could trigger 5-10% position adjustments, and market microstructure could amplify these into larger swings.

275 basis points: How much longer can it hold?

Zooming out from the press conference, a more structural question is emerging.

Japan’s policy rate has climbed from 0 to 1% in under two years. If it hits 1.25% by year-end, the era of Japan as the world’s cheapest financing source—a nearly 30-year era—is accelerating toward its end.

This isn’t just a shift in numbers.

The core logic of yen carry trading is “Japan rates always low, yen always weak.” This assumption has never been seriously challenged in thirty years. But as rates go from 0 to 1%, possibly 1.25% by year-end, and carry shrinks from 500+bp to 250bp, the foundation of that assumption is being dug away.

Broadly measured yen financing—Japanese bank lending to offshore—totals about ¥1,420 trillion, equivalent to 236% of Japan’s GDP. These funds won’t exit overnight because of one press conference. But as normalization becomes trend, each rate hike raises financing costs, narrows carry space, and forces out the weakest positions.

This is a slow-moving variable. The June 16 press conference is a fast variable. The combination is the true risk structure of this BOJ meeting.

The two hours after the press conference: What to watch, and how

Around 11:00 Beijing time on June 16, BOJ announces its rate hike decision. No surprises expected at this step.

The real pricing window starts around 14:30—the press conference led by Uchida.

The market will be looking for three signals from the press conference.

Whether there’s room for more hikes this year—if Uchida says “gradual adjustment according to economic and price trends,” consistent with Ueda’s earlier tone, the market will read this as “successful communication.” If he says “not urgent to act further,” the market will be confused.

Economic risk assessment—Iran’s war has pushed up energy inflation, and the ECB has hiked because of it. Uchida’s inflation risk assessment will affect the market’s expectations for BOJ’s rate path.

Language about financial market stability—Uchida’s statement in August 2024, “won’t hike in unstable markets,” became a signature message. If he repeats something similar this time, it’ll be read as “the safety valve remains”; if not, the market will speculate whether the safety valve has been pulled.

In the first two hours after the press conference, watch USD/JPY. Yen movement is the “switch” for the entire transmission chain.

If the yen appreciates less than 1%, it’s likely a mild adjustment; carry trades unwind in an orderly manner, Asia-Pacific markets and EM currencies won’t react much.

If the yen appreciates more than 1.5%, Korea’s KOSPI will likely drop 2-4%. August 2024 showed Korea is the first station in the Asia-Pacific transmission chain—high foreign holdings, export competitiveness directly tied to the yen. Also monitor the rupiah, peso, and real—other carry trade target currencies’ reverse moves.

If the yen appreciates over 3%—unlikely, but not impossible—you enter systemic deleveraging. The Nikkei could drop 3-5%, VIX could jump to 25-30, and Nasdaq would also come under pressure.

The direction for US 10-year Treasury yields is complex: safe haven flows would drive yields down, but carry unwinding itself may involve selling Treasuries (pushing yields up). The two forces offset, so short-term direction is uncertain.

June 20: Validation moment

After the June 16 press conference, the market enters a “wait and verify” window.

The CFTC position report released June 20 (covering data as of June 17) is key. If net shorts decrease significantly—dropping below $8 billion—it means carry traders actively reduced positions around the BOJ meeting, reducing the risk of a stampede. If positions remain unchanged or even increase, it means the market is “holding on,” and the destructive potential of the next shock is higher.

Then watch two timing points: Japan’s May CPI on June 20 (if inflation accelerates, more rate hike expectations will be strengthened), and Ueda’s first public statement after leaving the hospital (expected mid-July).

With carry safety cushions down to just 275bp, the governor absent, and positions at dangerous levels, the 14:30 press conference on June 16 could be the most pivotal 45 minutes in global financial markets this year.

Risk warnings and disclaimerMarkets are risky, investment requires caution. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their own circumstances. Investing based on this, responsibilities are your own. ```