Japan's Next Export Is Higher Interest Rates

[Realistbear]

http://quote.bloomberg.com/apps/news?pid=1...id=aq.WE7r4zadM

Japan's Next Export Is Higher Interest Rates: William Pesek Jr.

May 29 (Bloomberg) -- In Mumbai in January, I asked India's No. 2 central bank official the same question I pose to every policy maker these days: What does Japan's revival mean for Asia?

Without a moment's hesitation, Rakesh Mohan replied: ``The yen-carry trade will make things interesting.''

Yet Japan's long-awaited return to the economic plus column is here. And even if the country doesn't grow 5 percent a year, there can be little doubt that the BOJ will raise rates from zero percent. The central bank is keen to return some normalcy to Japan's monetary policy.

Global markets have been slow to grasp the specter of higher Japanese rates. In recent weeks, though, surprisingly large moves in markets from Iceland to Turkey to India have been partly attributed to the unwinding of yen trades. And where yen- volatility is concerned, we probably haven't seen anything yet

.

HPC here it comes.

[Righteous]

HPC here it comes

Hurray !!!!!! God bless ya !!

Err… just one small question, how many weeks will it take..... Oh no not that one again.

[IMupNorth]

Hurray !!!!!! God bless ya !!

Err… just one small question, how many weeks will it take..... Oh no not that one again.

Don't you just love satire !!

HPC - even measured in years, realistbear wouldn't have enough fingers. The guy is severely deluded but you have to admire his mindless tenacity and devotion to the cause.

Stuck records are less repetitive that RB.

[Realistbear]

Don't you just love satire !!

HPC - even measured in years, realistbear wouldn't have enough fingers. The guy is severely deluded but you have to admire his mindless tenacity and devotion to the cause.

Stuck records are less repetitive that RB.

Global markets have been slow to grasp the specter of higher Japanese rates.

Key words: "slow to grasp." With the record levels of debt and severely stretched sheeple this house market is going to crumble like the the proverbial house of sand with the first hike caused by the worldwide shift to a higher IR environment. The deluded ones are those who believe interest rate senistive assets only go up.

As Bloomberg point out, its going to get interesting.

[sam]

The one thing that i like about RB is the fact that he is not just churning out his OWN repetitive message unlike some(catct 22 zzzzzzzz), there is nearly always a link with RB's posts, and from a reliable source.

[Elizabeth]

The one thing that i like about RB is the fact that he is not just churning out his OWN repetitive message unlike some(catct 22 zzzzzzzz), there is nearly always a link with RB's posts, and from a reliable source.

Pot and kettle?

[Guest]

Stuck records are less repetitive that RB.

Pot and kettle also.

[sam]

Pot and kettle?

You just crack me up Elizabeth

Over 2000 posts of the same total ****** mmmmmm

You just could not make it up

[nimmmm]

http://www.tiscali.co.uk/news/newswire.php...y_template.html

B o J intervenes in overnight money markets to stem a jump in overnight rates. Looks like RB is right.....

[CrashIsUnderWay]

here we go chaps. Transfer it to the high interest account!

[Casual Observer]

http://www.tiscali.co.uk/news/newswire.php...y_template.html

B o J intervenes in overnight money markets to stem a jump in overnight rates. Looks like RB is right.....

I don't think anyone disputes the story about Japan's move up from zero IRs. But they are questioning his level of certainty that this will lead to a UK HPC!

Edited May 29, 2006 by Casual Observer

[the_duke_of_hazzard]

http://www.tiscali.co.uk/news/newswire.php...y_template.html

B o J intervenes in overnight money markets to stem a jump in overnight rates. Looks like RB is right.....

So the BoJ are buying yen. Wouldn't that make sense if they intend to raise the value of yen, ie raise interest rates?

[geneer]

Don't you just love satire !!

HPC - even measured in years, realistbear wouldn't have enough fingers. The guy is severely deluded but you have to admire his mindless tenacity and devotion to the cause.

Stuck records are less repetitive that RB.

can you lose the fat cow avatar please.

shes had too many deep fried mars bars.

[Realistbear]

http://www.tiscali.co.uk/news/newswire.php...ate.html?page=4

Tightening liquidity has pushed up money market yields from last week as the BOJ has slashed excess reserves in the banking system by some 19 trillion yen in less than two months to wind down its previous policy.

As Japan tightensd IR are reacting accordingly. I think they are trying a "cake and eat it" gambit to keep IR down at the same time as removing that which pushed rates down too far in the first place. BoJ may be reacting to pressure from the world banks to unleash higher rates slowly to prevent market crashes and bursting bubbles. At least there is a heads-up for what is coming and some time left for those who are over-leveraged to get out. The key is beating the others to the exits.

The Asian markets are going to cash which may point to what the big money is seeing by way of IR hikes:

http://www.businessworld.ie/livenews.htm?a...rollingnews.htm

Asian shares close mixed

Monday, May 29 09:35:32

(BizWorld)

Shares across Asia and the Pacific closed mixed, with some markets rising on Wall Street's Friday rebound and others falling because of profit taking, dealers said.

After early rises in response to Wall Street, investors

moved to cash

in gains late in the session.

Consensus is increasing for a hike from BoJ as early as July:

http://mdn.mainichi-msn.co.jp/business/new...0bu012000c.html

Half of experts expect BOJ rate hike in July: poll

Nearly half of financial market experts expect the Bank of Japan to raise interest rates from almost zero in July, according to a joint survey by Jiji Press and Reuters released Monday.

The survey, conducted for seven days through Thursday, showed that 46 out of 96 economists and other experts polled forecast that the BOJ will decide on a rate hike at a meeting of its Policy Board scheduled for July 13-14.

A .25% hike may translate into a larger hike our end given the banking system's mark-up from source to final debtor. Mortgage rates are likely to respond whether Gordon does anything or not. The creditors hold the strings now not the "Miracle Workers."

[gfromls]

Ignore the world's biggest central banks at your peril

(Filed: 29/05/2006)

Round one to the Bank of Japan, ultimate cause of the violent sell-off in stocks, commodities, and riskier bonds across the world over the past three weeks writes Ambrose Evans-Pritchard

Round one to the Bank of Japan, ultimate cause of the violent sell-off in stocks, commodities, and riskier bonds across the world over the past three weeks.

Governor Toshihiko Fukui has bled more than $140bn (£75.3bn) from his banking system since March 9 to reduce a menacing overhang of liquidity left from the battle against deflation. He is halfway through.

No longer buying fistfuls of US Treasuries with printed money to hold down the yen, the Bank of Japan has been the silent force pushing up global bond yields this year by 0.8pc - the jump that really lies behind the market rout.

Or rather, it has stopped holding yields down to the lowest levels in a century. Japanese holdings of US Treasuries have fallen by $74.5bn since December. "We are reaching an inflection point in monetary policy," said Mr Fukui.

Inflection to some, bloodbath to others. The first casualties began to emerge on the fringes of the "yen carry trade" earlier this spring.

Hedge funds that had borrowed for zilch in Tokyo, to lend for a fat premium to overheating Iceland and New Zealand, began rushing for narrow exits.

The storm has since swept up much of the globe, setting off the steepest falls in emerging market stocks and bonds since the Russian default in 1998.

"Most people underestimated the effects of monetary tightening in Japan," said Phillip Poole, an economist at HSBC. "The liquidity that has driven these markets is being withdrawn."

The next Japanese spanner in the works will be the end of zero interest rates, or zirp as it is known. Bank-watchers have pencilled in July or September for the moment of reckoning.

Few investors lose sleep worrying about life after zirp, but our guardians at the Bank of International Settlements view it as the greatest imminent risk to global markets.

The Japanese have built up net foreign assets worth $2,500bn, investing abroad what they refused to spend at home during their 15-year slump.

Now they are buying again. Tokyo and Osaka land prices are ticking up smartly after falling 57pc since 1990. The IMF forecasts 2.75pc growth this year

"We are all going to have to look over our shoulder when Japan raises rates because nobody knows what is going to happen when all this money goes back home," said a BIS official.

Even so, round two may yet go to the European Central Bank on June 8 as Frankfurt's hawks lose patience with exploding M3 money growth, and a housing bubble threatening the viability of monetary union itself.

Housing loans (ex Germany) grew 19.4pc in the year to March, on top of the 17pc surge the year before. Spain is a disaster waiting to happen. In Portugal it has already happened.

Judging by the apocalyptic tone of the Bundesbank's May report, Europe is on the brink of a monetary shock going far beyond the mincing half-measures trickled out until now by Jean-Claude Trichet, ECB chief and French "soft euro" inflationist.

"There are immediate inflationary risks emerging," said the bank, citing monetary growth of 10.5pc as a "serious warning sign" that policy was too lax. The eurozone's HCIP inflation is now 2.5pc.

Mr Trichet - and his Club Med allies - can ignore the Bundesbank, as he did earlier this spring, reneging on a quarter-point May rate rise (to 2.75pc) already signalled to the markets.

But that way lies perdition, for the ECB has no more credibility than the Banca d'Italia without Buba's reflected glory.

On the warpath, the Teutonic-bloc is now trying to shame Mr Trichet's doves into doing their monetary duty. "There is no dispute that a further tightening of monetary policy is needed," said Austrian governor, Klaus Liebscher.

We have been warned. The ECB is about to bare its fangs for the first time since EMU. Germany is back, and a reawakened Buba is snorting with the same bloody-minded determination it displayed before causing the 1987 crash and the 1992 bust up of the ERM.

Yet round three must surely go to the US Federal Reserve with a 17th consecutive rate rise to 5.25pc - if we get that far.

Ben Bernanke was back-peddling fast in a letter to Congress last week, pleading that core CPI inflation "overstates" price rises. "Monetary policy must be forward-looking," he said.

Has the Fed already gone too far, baking a recession into the pie? Will the delayed effects of past tightening kick in, with mounting ferocity, just as the housing boom plummets into bust?

"Housing mayhem seems unavoidable. The US hard landing begins now," said Charles Dumas, global strategist at Lombard Street Research.

Mortgage applications are down 17pc in a year. House sales are down 5.7pc, and inventories of unsold new houses are at their highest since 1996. The central prop holding up the US consumer boom is crumbling, leaving behind record household debts equal to 127pc of disposable income.

"As the hard landing/recession arrives, it is the Asian exporters, the commodity markets and currencies, and especially the base metals that are likely to crash over the next year. The game is up for assets that have gone way too high on the basis of cheap funding and optimistic delusions," said Mr Dumas.

Teun Draaisma, Morgan Stanley's chief European equity strategist, had a warning for bargain hunters, even after the 8pc fall in European stocks and 15pc fall in the MSCI emerging markets index. "Do not be tempted to buy. The first violent part of this correction took nine trading days: the second part may well take several months," he said.

The world has enjoyed a magnificent boom for 24 years, punctuated only by light downturns along the way. The cycle has been kept alive beyond its natural life by ever-laxer monetary policy, feeding ever bigger asset bubbles and encouraging ever-higher levels of debt.

Central banks can draw down prosperity from the future for a while. In the end - now? - the future arrives.

[gfromls]

Excellent post gfromls - thanks

oh no nnnnnn no

i nicked it from the telegragh

couldn't get the link theng to work.

[Realistbear]

Ignore the world's biggest central banks at your peril

(Filed: 29/05/2006)

Round one to the Bank of Japan, ultimate cause of the violent sell-off in stocks, commodities, and riskier bonds across the world over the past three weeks writes Ambrose Evans-Pritchard

Round one to the Bank of Japan, ultimate cause of the violent sell-off in stocks, commodities, and riskier bonds across the world over the past three weeks.

Governor Toshihiko Fukui has bled more than $140bn (£75.3bn) from his banking system since March 9 to reduce a menacing overhang of liquidity left from the battle against deflation. He is halfway through.

No longer buying fistfuls of US Treasuries with printed money to hold down the yen, the Bank of Japan has been the silent force pushing up global bond yields this year by 0.8pc - the jump that really lies behind the market rout.

Or rather, it has stopped holding yields down to the lowest levels in a century. Japanese holdings of US Treasuries have fallen by $74.5bn since December. "We are reaching an inflection point in monetary policy," said Mr Fukui.

Inflection to some, bloodbath to others. The first casualties began to emerge on the fringes of the "yen carry trade" earlier this spring.

Hedge funds that had borrowed for zilch in Tokyo, to lend for a fat premium to overheating Iceland and New Zealand, began rushing for narrow exits.

The storm has since swept up much of the globe, setting off the steepest falls in emerging market stocks and bonds since the Russian default in 1998.

"Most people underestimated the effects of monetary tightening in Japan," said Phillip Poole, an economist at HSBC. "The liquidity that has driven these markets is being withdrawn."

The next Japanese spanner in the works will be the end of zero interest rates, or zirp as it is known. Bank-watchers have pencilled in July or September for the moment of reckoning.

Few investors lose sleep worrying about life after zirp, but our guardians at the Bank of International Settlements view it as the greatest imminent risk to global markets.

The Japanese have built up net foreign assets worth $2,500bn, investing abroad what they refused to spend at home during their 15-year slump.

Now they are buying again. Tokyo and Osaka land prices are ticking up smartly after falling 57pc since 1990. The IMF forecasts 2.75pc growth this year

"We are all going to have to look over our shoulder when Japan raises rates because nobody knows what is going to happen when all this money goes back home," said a BIS official.

Even so, round two may yet go to the European Central Bank on June 8 as Frankfurt's hawks lose patience with exploding M3 money growth, and a housing bubble threatening the viability of monetary union itself.

Housing loans (ex Germany) grew 19.4pc in the year to March, on top of the 17pc surge the year before. Spain is a disaster waiting to happen. In Portugal it has already happened.

Judging by the apocalyptic tone of the Bundesbank's May report, Europe is on the brink of a monetary shock going far beyond the mincing half-measures trickled out until now by Jean-Claude Trichet, ECB chief and French "soft euro" inflationist.

"There are immediate inflationary risks emerging," said the bank, citing monetary growth of 10.5pc as a "serious warning sign" that policy was too lax. The eurozone's HCIP inflation is now 2.5pc.

Mr Trichet - and his Club Med allies - can ignore the Bundesbank, as he did earlier this spring, reneging on a quarter-point May rate rise (to 2.75pc) already signalled to the markets.

But that way lies perdition, for the ECB has no more credibility than the Banca d'Italia without Buba's reflected glory.

On the warpath, the Teutonic-bloc is now trying to shame Mr Trichet's doves into doing their monetary duty. "There is no dispute that a further tightening of monetary policy is needed," said Austrian governor, Klaus Liebscher.

We have been warned. The ECB is about to bare its fangs for the first time since EMU. Germany is back, and a reawakened Buba is snorting with the same bloody-minded determination it displayed before causing the 1987 crash and the 1992 bust up of the ERM.

Yet round three must surely go to the US Federal Reserve with a 17th consecutive rate rise to 5.25pc - if we get that far.

Ben Bernanke was back-peddling fast in a letter to Congress last week, pleading that core CPI inflation "overstates" price rises. "Monetary policy must be forward-looking," he said.

Has the Fed already gone too far, baking a recession into the pie? Will the delayed effects of past tightening kick in, with mounting ferocity, just as the housing boom plummets into bust?

"Housing mayhem seems unavoidable. The US hard landing begins now," said Charles Dumas, global strategist at Lombard Street Research.

Mortgage applications are down 17pc in a year. House sales are down 5.7pc, and inventories of unsold new houses are at their highest since 1996. The central prop holding up the US consumer boom is crumbling, leaving behind record household debts equal to 127pc of disposable income.

"As the hard landing/recession arrives, it is the Asian exporters, the commodity markets and currencies, and especially the base metals that are likely to crash over the next year. The game is up for assets that have gone way too high on the basis of cheap funding and optimistic delusions," said Mr Dumas.

Teun Draaisma, Morgan Stanley's chief European equity strategist, had a warning for bargain hunters, even after the 8pc fall in European stocks and 15pc fall in the MSCI emerging markets index. "Do not be tempted to buy. The first violent part of this correction took nine trading days: the second part may well take several months," he said.

The world has enjoyed a magnificent boom for 24 years, punctuated only by light downturns along the way. The cycle has been kept alive beyond its natural life by ever-laxer monetary policy, feeding ever bigger asset bubbles and encouraging ever-higher levels of debt.

Central banks can draw down prosperity from the future for a while. In the end - now? - the future arrives.

"

Most people underestimated the effects of monetary tightening in Japan," said Phillip Poole, an economist at HSBC. "The liquidity that has driven these markets is being withdrawn."

The next Japanese spanner in the works will be the end of zero interest rates, or zirp as it is known. Bank-watchers have pencilled in July or September for the moment of reckoning

.

Those with IR sensitive assets, including houses with massive mortgages, have a few weeks to get out before the hammer drops. Hometrack suggest that the second half of this year is not going to be so good for house prices--this may prove to be the understatement of the decade.