The impact of hot money on global market dynamics: The Japan case

This thesis offers an original analysis of Japan's unconventional monetary policies implemented after 1990, focusing not only on domestic economic balances but also on their broader implications for the global financial system. Japan's prolonged period of low interest rates and expansionary policies significantly shaped capital flows toward emerging markets, amplifying exchange rate volatility and financial fragility, particularly through the mechanism of carry trade. The strategic role of the Japanese yen as a global funding currency is examined, alongside the effects of the Bank of Japan's policy trajectory on asset classes such as gold, silver, oil, government bonds, and equities. Using graphical and time-series data, the study traces how Japanese capital flows influenced international portfolio behaviors during key global shocks, including the 2008 Global Financial Crisis and the COVID-19 pandemic of 2020. The analysis and findings suggest that Japan's experience represents more than a country-specific monetary episode; it has evolved into a leading and cautionary paradigm for modern central banking.