Jump to content
House Price Crash Forum
Realistbear

Reuters: Japan Admits To Inflation Growing In Their Economy

Recommended Posts

http://today.reuters.com/investing/finance...N-MIZOGUCHI.XML

Japan rates up on inflation worry-ex-MOF Mizoguchi

Tue Apr 18, 2006 6:05 AM ET

By Tamawa Kadoya

TOKYO, April 18 (Reuters) - Recent rises in Japan's long-term interest rates stem more from inflationary concerns than rate risks, and finance leaders will likely voice such concerns this week, a Japanese former top financial diplomat said on Tuesday.
Robust economic growth, tightening supply and surging oil prices are stoking inflationary concerns and central banks need to take appropriate monetary policy steps to contain them, Zembei Mizoguchi, a former vice finance minister for international affairs, told a small group of reporters.
"Inflationary pressures may be growing stronger," he said. "In order to avoid inflationary concerns from taking hold, each country is tightening monetary policy while watching their respective conditions."

The Japanese have no choice but to begin a series of rate hikes. Since they are the world's creditor we can expect the ripple effect to begin pushing up our rates very soon. :o

( :D )

Share this post


Link to post
Share on other sites

http://today.reuters.com/investing/finance...N-MIZOGUCHI.XML

Japan rates up on inflation worry-ex-MOF Mizoguchi

Tue Apr 18, 2006 6:05 AM ET

By Tamawa Kadoya

TOKYO, April 18 (Reuters) - Recent rises in Japan's long-term interest rates stem more from inflationary concerns than rate risks, and finance leaders will likely voice such concerns this week, a Japanese former top financial diplomat said on Tuesday.
Robust economic growth, tightening supply and surging oil prices are stoking inflationary concerns and central banks need to take appropriate monetary policy steps to contain them, Zembei Mizoguchi, a former vice finance minister for international affairs, told a small group of reporters.
"Inflationary pressures may be growing stronger," he said. "In order to avoid inflationary concerns from taking hold, each country is tightening monetary policy while watching their respective conditions."

The Japanese have no choice but to begin a series of rate hikes. Since they are the world's creditor we can expect the ripple effect to begin pushing up our rates very soon. :o

( :D )

Sorry if I sound thick - but I am when it comes to global economics!

Are you saying Japan lends money to the rest of the world at 0% interest? I am aware of this thing called carry trade, but how much and to whom? :unsure: Thanks in advance.

Share this post


Link to post
Share on other sites

Sorry if I sound thick - but I am when it comes to global economics!

Are you saying Japan lends money to the rest of the world at 0% interest? I am aware of this thing called carry trade, but how much and to whom? :unsure: Thanks in advance.

It's very close to 0%

Share this post


Link to post
Share on other sites

..but how much and to whom?

Im not sure of details but the impression I get is trillions of $ and to everyone

Share this post


Link to post
Share on other sites

Im not sure of details but the impression I get is trillions of $ and to everyone

You mean other central banks - or individual companies?

Why would you borrow from your 'local' central bank at 4.5%, when you can borrow from Japan at close to 0%.

I know its probably more complicated that this, but if this is going to affect inflation and interest rates and then house prices here, maybe these global impacts could be explained in non-economic guru terms as well? :)

Share this post


Link to post
Share on other sites
Japan's government is particularly wary of a rise in long-term interest rates as it would boost the cost of servicing massive state debt, which is around 150 percent of gross domestic product and the worst among leading industrial countries.

And I thought America was bad. Won't this stop them from rasing too high?

Edited by Foobar

Share this post


Link to post
Share on other sites
Why would you borrow from your 'local' central bank at 4.5%, when you can borrow from Japan at close to 0%.

For one thing, borrowing in pounds locks in a 1:1 exchange rate, borrowing Yen it only takes a small change on the markets to knock out that 4% benefit in rates.

Share this post


Link to post
Share on other sites

For one thing, borrowing in pounds locks in a 1:1 exchange rate, borrowing Yen it only takes a small change on the markets to knock out that 4% benefit in rates.

Ok, so what does the carry trade borrow in then? :unsure:

Share this post


Link to post
Share on other sites

Yen, but they either rely on the exchange rates dropping due to the BoJ pumping out so much cheap credit, or use some wacky hedging schemes to try to restrict the loss they can take from exchange rate fluctuations.

Share this post


Link to post
Share on other sites

Okay cheers guys. I will print it off and read it whilst I'm developing software...!

However, after reading the first couple of paragraphs, its becoming obvious I'm not going to understand an effing word of it. Oh well, one step at a time martin.

Maybe I'll just wait for house prices to fall and blame it on Japan....

Edited by Come On Down

Share this post


Link to post
Share on other sites

Come On Down:

This very readable article explains the dynamics of Japan's quantitative easing and how its withdrawal may affect world markets (esp asset prices):

Japan's giant sucking sound

Edit: The point being that the ending of the easing will itself cause asset adjustments. Japanese interest rates don't have to rise...yet.

Edited by FreeTrader

Share this post


Link to post
Share on other sites

The bottom line:

As Japan's excess liquidity is mopped up, investors that borrowed Japanese yen to fund investments in other countries will find it impossible to renew their swaps. Because international currency and interest-rate swap liquidity is very concentrated in tenors of one year or less (the life of a swap is called its tenor), the majority of these swaps will mature this year. Consequently, investors will be forced to sell the equity and fixed-income assets that these swaps financed. In addition, these investors will have to buy yen to repay their yen loans.
The end of quantitative easing is another factor that will propel a
sharp correction in global investment asset values this year.
It will also produce substantial yen appreciation against most currencies.

It is amazing that none of the VI papers have mentioned this reality as something HPI is going to face in the weeks and months ahead just as if it did not exist.

Share this post


Link to post
Share on other sites

Come On Down:

This very readable article explains the dynamics of Japan's quantitative easing and how its withdrawal may affect world markets (esp asset prices):

Japan's giant sucking sound

Edit: The point being that the ending of the easing will itself cause asset adjustments. Japanese interest rates don't have to rise...yet.

Cheers Freetrader. I like readable.

Share this post


Link to post
Share on other sites

] It will also produce substantial yen appreciation against most currencies. [/indent]

Can you please explain why, the £ has been appreciating against the Yen for quite a long time, when according to your theories the yen should be moving the other way ?

Share this post


Link to post
Share on other sites

Come On Down:

This very readable article explains the dynamics of Japan's quantitative easing and how its withdrawal may affect world markets (esp asset prices):

Japan's giant sucking sound

Edit: The point being that the ending of the easing will itself cause asset adjustments. Japanese interest rates don't have to rise...yet.

>>Using a Japanese bank as a counterparty, foreign banks borrowed huge amounts of yen at very low interest rates in 2005. This yen was swapped for foreign currencies and invested in other Asian countries as well as in the United States.

This points to one interesting fact. While this access liquidity in 2005, caused boom in stock and commodity market as well as in housing market in many Asian countries, it failed to materialise any boom in the UK housing market ( except the much hyped mini winter/spring boom). Does it show how seriously the UK houses are overvalued and how far will they correct when this liquidity is gone.

Share this post


Link to post
Share on other sites

Can you please explain why, the £ has been appreciating against the Yen for quite a long time, when according to your theories the yen should be moving the other way ?

Because everyone borrowed huge amounts of free/very cheap yen, and then used it to buy dollars, euros etc… and then buy commodities and stock.

Most of that will be repaid later this year when the BOJ finally tightens up (they don’t make money on 0% loans). Meaning assets will be sold and the capital exchanged to purchase yen to repay loans taken out in yen from the BOJ.

Edited by ?...!

Share this post


Link to post
Share on other sites

Can you please explain why, the £ has been appreciating against the Yen for quite a long time, when according to your theories the yen should be moving the other way ?

As Japan's excess liquidity is mopped up, investors that borrowed Japanese yen to fund investments in other countries will find it impossible to renew their swaps. Because international currency and interest-rate swap liquidity is very concentrated in tenors of one year or less (the life of a swap is called its tenor), the majority of these swaps will mature this year. Consequently, investors will be forced to sell the equity and fixed-income assets that these swaps financed. In addition, these investors will have to buy yen to repay their yen loans.

The end of quantitative easing is another factor that will propel a sharp correction in global investment asset values this year. It will also produce substantial yen appreciation against most currencies.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.