Financial encyclopedia

While markets remain focused on when the US Federal Reserve will cut interest rates, Japan and Switzerland, the world's two "low interest rates", have quietly completed a historic role reversal.

On March 19th the Bank of Japan kept its policy rate at 0.5%. The next day, the SNB cut interest rates from 0.5% to 0.25%, the fifth cut in a row. The move took Japan's policy interest rate to a rare higher level than Switzerland's, rewriting the traditional perception of global money markets.

On the surface is only a technical adjustment, but in fact is a quietly unfolding financial earthquake?

Why is this rate reversal worth watching?

The global interest rate cycle may have turned

Switzerland became the first major central bank to formally cut interest rates in the current round of monetary policy, signaling that some central banks have taken the lead in responding to peaking inflation and economic pressures, sending a signal that a global rate-cutting wave is about to begin.

Japan's "ultra-low interest" era is over, and the flow of funds may change

Japan's move away from negative interest rates may attract capital back; The traditional "Carry Trade" strategy may also wear thin, triggering a reallocation of funds.

Interest rate structure restructuring, asset pricing logic needs to be updated

The thinking of "high interest = strong currency" and "low interest = source of risk funds" that investors are used to is being subverted. Funds may re-evaluate the attractiveness of different assets, and assets such as gold, bonds and technology stocks that have the potential to recover in a low interest rate environment deserve renewed attention.

What signal does this change send?

Japan has left the "zero interest rate country" status, and funds are expected to return to the Asian market

The shift to looser monetary policy in Switzerland is putting pressure on European capital allocation

The global interest rate structure is beginning to restructure, and the logic of asset pricing has the opportunity to be rewritten

This quiet policy shift may be the prelude to a realignment of the global capital landscape.