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Latest On The Bo J Hike: It's On

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http://news.yahoo.com/s/afp/20060708/wl_as...economybankrate

Sat Jul 8, 12:17 AM ET

TOKYO (AFP) -
The Bank of Japan will raise interest rates next week
for the first time in nearly six years in a sign that the Japanese economy is gaining momentum, news reports say.
With Japan expected to shake off deflation, the central bank has judged that
all conditions have been met for a rate hike,
the Asahi Shimbun said, without citing sources.
Governor Toshihiko Fukui will propose a rate hike during a two-day policy meeting Thursday-Friday, with a majority of the board members expected to agree, the Mainishi Shimbun said, without citing sources.
In March, it ended its five-year policy of "quantitative easing," under which it flooded the banking system with excess funds to offer easy credit and stimulate the economy.

Let the good times roll.......................... :D

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The man in the street has no idea how a country 10,000 miles away will change his/her life for a long time to come :)

Too true. That is why the HPC will come like a thief in the night--when people least expect it. Sudden, shocking and leaving no time to get out of the way. Crashes rarely give much warning to sheeple. If people heeded warnings, crashes would probably not happen.

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I don't think anyone knows how this is going to affect us.

There are so many hedge funds that have borrowed on the carry trade, it was a no-brainer.

And we know these boys have a propensity for playing with derivatives, so just about anything can happen.

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wonder how much they will raise by ?

0.5% ?

BOJ has been a free bank for the last 6 years, lending money for nothing which will all end in dire straits :lol::lol:

Whats your view on the yen carry trade RB, surely this rate decision will have a big impact ?

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wonder how much they will raise by ?

0.5% ?

BOJ has been a free bank for the last 6 years, lending money for nothing which will all end in dire straits :lol::lol:

Whats your view on the yen carry trade RB, surely this rate decision will have a big impact ?

I do not have much knowledge of how, exactly, the banking system works. But it seems that it is a given that Japan has been flooding the Western economies with very cheap credit throughout the period of the inflating house prices. HPI would not have occured, IMO, if IR were neutral. Because of Japan they have remained accomodative (really means negative in real terms) which is all about to stop. Thus, we are entering a new phase of the eocnomic cycle where IR will no longer be accomodative. To me, a HPC looks inevitable as the fuel driving up prices is about to be choked off.

I do not know what kind of IR hikes we will see here as a result of a small rise in Japan. Some describe it as a ripple effect that gathers momentum by the time it reaches the end user--or borrower. Thus .25% in Japan is .50% in the hands of the large Japanese Commercial banks, 1% in the intermediary banks and possibly 2% in the hands of the High Street banks which will be passed on to the consumer at an additional mark-up. The bottom line is that .25% hike in Japan will probably not mean a .25% hike in the UK but something quite a bit higher.

Someone posted a number of articles from the mainline press (Times, Telegraph, Moneyweek, The Economist etc.) a few days ago about some of the possible effects and a IR crisis was chief among them. The big money has been advising about the threat to IR sensitive assetts and Warren Buffett was chief among them. I think it will be the single biggest factor acting as the trigger for the coming HPC.

This Autumn may see some more of the kinds of data Halifax issued this week.

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Guest Alright Jack

Too true. That is why the HPC will come like a thief in the night--when people least expect it. Sudden, shocking and leaving no time to get out of the way. Crashes rarely give much warning to sheeple. If people heeded warnings, crashes would probably not happen.

Yeah that's right, cos' like, er, fiat currencies weren't forced into place for the sole purpose of printing it out in vast quantities for the benefit of government and special interests.

To put it another way,

suppose you had the ability to create money would you

A) Print lots and lots of it so you and your mates can have a foookoff big party

B) Not print any more.

How on earth do people arrive at the conclusion that there is going to be this big liquidity draw down? Why would anyone go to such extremes to acquire the means to counterfeit if they did not intend to use it?

[ Abusive text removed by moderator ]

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Yeah that's right, cos' like, er, fiat currencies weren't forced into place for the sole purpose of printing it out in vast quantities for the benefit of government and special interests.

To put it another way,

suppose you had the ability to create money would you

A) Print lots and lots of it so you and your mates can have a foookoff big party

B) Not print any more.

How on earth do people arrive at the conclusion that there is going to be this big liquidity draw down? Why would anyone go to such extremes to acquire the means to counterfeit if they did not intend to use it?

Could you explain that theory in a little more detail please?

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Yeah that's right, cos' like, er, fiat currencies weren't forced into place for the sole purpose of printing it out in vast quantities for the benefit of government and special interests.

To put it another way,

suppose you had the ability to create money would you

A) Print lots and lots of it so you and your mates can have a foookoff big party

B) Not print any more.

How on earth do people arrive at the conclusion that there is going to be this big liquidity draw down? Why would anyone go to such extremes to acquire the means to counterfeit if they did not intend to use it?

and what about the smart people, who are not in on the party and fight back ?

sooner or later all parties come to an end.... and the bigger the party the bigger the hangover :P

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How on earth do people arrive at the conclusion that there is going to be this big liquidity draw down? Why would anyone go to such extremes to acquire the means to counterfeit if they did not intend to use it?

Do some reading on the situation in Japan.

Paul Krugman, widely acknowledged as one of the world's top money theorists, advised the Bank of Japan to print as much money as possible.

Which they did.

But surprise, it didn't work. Once deflation sets in it's practically impossible to stop.

John Maynard Keynes said that it was like pushing on a piece of string. Once prices start falling there really isn't much a central bank can do to stop deflation.

It's called a liquidity trap.

This is why Greenspan reacted so quickly to the dot-com bust by slashing rates so quickly.

He commissioned a very detailed report into the Japanese situation, and dropping rates to 1% was the medicine that he applied with very great success.

Unfortunately this created the mother of all asset bubbles, and those nice folk in America are about to deal with it the hard way.

And take us along for the ride.

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http://news.yahoo.com/s/afp/20060708/wl_as...economybankrate

Sat Jul 8, 12:17 AM ET

TOKYO (AFP) -
The Bank of Japan will raise interest rates next week
for the first time in nearly six years in a sign that the Japanese economy is gaining momentum, news reports say.
With Japan expected to shake off deflation, the central bank has judged that
all conditions have been met for a rate hike,
the Asahi Shimbun said, without citing sources.
Governor Toshihiko Fukui will propose a rate hike during a two-day policy meeting Thursday-Friday, with a majority of the board members expected to agree, the Mainishi Shimbun said, without citing sources.
In March, it ended its five-year policy of "quantitative easing," under which it flooded the banking system with excess funds to offer easy credit and stimulate the economy.

Let the good times roll.......................... :D

Well spotted RB.

I look forward to seeing how this turns out.... :D

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I look forward to seeing how this turns out.... :D

It's not going to be pretty.

Might well be worth shorting stock-indices and USD/JPY next week though.

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http://news.yahoo.com/s/afp/20060708/wl_as...economybankrate

Sat Jul 8, 12:17 AM ET

TOKYO (AFP) -
The Bank of Japan will raise interest rates next week
for the first time in nearly six years in a sign that the Japanese economy is gaining momentum, news reports say.
With Japan expected to shake off deflation, the central bank has judged that
all conditions have been met for a rate hike,
the Asahi Shimbun said, without citing sources.
Governor Toshihiko Fukui will propose a rate hike during a two-day policy meeting Thursday-Friday, with a majority of the board members expected to agree, the Mainishi Shimbun said, without citing sources.
In March, it ended its five-year policy of "quantitative easing," under which it flooded the banking system with excess funds to offer easy credit and stimulate the economy.

Let the good times roll.......................... :D

You seem to be well informed on these matters .... what have things been like in Japan during this era of 0% base rates?

How long have they had very low rates?

What have mortgage rates been?

What has happened to house prices?

Has there been an increase of consumer spending but without inflation?

We know what's happened here in an era of historically low interest rates - curious to know how it has gone in Japan.

Edited by Marina

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You seem to be well informed on these matters .... what have things been like in Japan during this era of 0% base rates?

How long have they had very low rates?

What have mortgage rates been?

What has happened to house prices?

Has there been an increase of consumer spending but without inflation?

We know what's happened here in an era of historically low interest rates - curious to know how it has gone in Japan.

Just ran those questions past the japanese girlfriend.

The bank rates have been 0% for several years but mortgage rates for the average person havent been anywhere near that low and property prices kept going downhill but from a very high peak. They are only now at levels where a person with an average salary has a hope of buying which is causing the prices to stop falling. If you think our banks are creative at lending money have a look at the japanese 40-50 year mortgages and even ones which can be passed onto future generations. They needed these type to be able to keep lending at the peak several years ago. Still if prices consistantly keep falling its hard to persuade anyone to buy.....

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How long have they had very low rates?

I think it's been about 5 or 6 years. They increased slightly 4 or 5 years ago and then went down again.

The rise was a mistake.

What have mortgage rates been?

You can still get a two year fixed for about 1%. My mortgage here in Tokyo taken out recently is fixed for 20 years at 3.2%. This is one Japanese bank's rates in English:

http://www.shinseibank.com/english/housing/loan_kinri.pdf

What has happened to house prices?

They fell for 14 years until last year when they finally rose very slightly.

Has there been an increase of consumer spending but without inflation?

Japan as had a positive cpi for seven months. It's about 0.6% (I think) but excluding rising energy prices about 0.1%.

In my view, one big difference in Japan is that despite a decade of economic woe the resulting misery has been less apparentl than you might expect, particularly in cities. Yes, there was a rise in homelessness and suicides due to debt, but when I first visited Tokyo six years ago it was hard to believe how bad the economy was. One reason for this was that most people, duirng the times, had huge savings. Another was that companies were very reluctant to lay people off in huge numbers. I'm not sure that's the same in the UK.

Edited by i_godzuki

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BOJ has been a free bank for the last 6 years, lending money for nothing which will all end in dire straits :lol::lol:

Nice music reference there. Showing your age a bit though. :P

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Has there been an increase of consumer spending but without inflation?

Japan as had a positive cpi for seven months. It's about 0.6% (I think) but excluding rising energy prices about 0.1%.

In my view, one big difference in Japan is that despite a decade of economic woe the resulting misery has been less apparentl than you might expect, particularly in cities. Yes, there was a rise in homelessness and suicides due to debt, but when I first visited Tokyo six years ago it was hard to believe how bad the economy was. One reason for this was that most people, duirng the times, had huge savings. Another was that companies were very reluctant to lay people off in huge numbers. I'm not sure that's the same in the UK.

One of the big differences is that the Japanese maintained their savings ratio during the 80's boom, I don't have the number off the top of my head but it was around 8%, a very respectable ratio.

In the UK and States savings have gone, in fact in the States they now have a negative savings ratio.

This doesn't bode well for a downturn.

Edited by BandWagon

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Issued: February 6, 2006

Savings rate declines to 55-year low

The household savings rate in Japan sank to 2.8% in fiscal 2004, a level not seen in 55 years, on sluggish income growth and the nation's graying population.

The Cabinet Office released revised figures for the household savings rate, which is the ratio of savings to disposable income. The fiscal 2004 statistics are the latest data available.

In addition to economic fluctuations, the savings rate's decline has been spurred by the maturing of the economy and the aging population. With the exception of brief periods during and after World War II, the savings rate in Japan had consistently topped 10%, even surpassing 20% in the mid-1970s.

After hitting this peak, however, the savings rate declined as economic growth slowed and the population aged. Since 2000, Japan's household savings rate has been lower than that of Germany and France.

An aging population tends to depress the savings rate over the long run because the elderly are more likely than the working population to tap into their assets to cover consumption. Some are concerned that Japan will soon follow the U.S., which saw its savings rate turn negative in 2005 for the first time in 72 years.

In last year's Annual Report on the Japanese Economy and Public Finance, the Cabinet Office had projected that Japan's savings rate would drop to roughly 3% around 2010.

Edited by i_godzuki

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One of the big differences is that the Japanese maintained their savings ratio during the 80's boom, I don't have the number off the top of my head but it was around 8%, a very respectable ratio.

In the UK and States savings have gone, in fact in the States they now have a negative savings ratio.

This doesn't bode well for a downturn.

Just a thought

Were told the boj reduced rates to get the japs spending.

On the other hand were told that the average jap is a very keen saver.

Am I missing something here?

Surly if the average jap had a stack of money in the bank he would be encouraged to spend more if rates were higher (ie more interest from his savings, making him feel wealthier)

Could the plan have been much bigger and ambitious – ie to get the whole world spending following the dot com bubble and later 9/11. (whether this was the plan or not – it seems to have been the outcome).

Could it have been done in a World Bank/ G8 nudge nudge wink wink kind of a way?

As I say – it’s just a thought

Feel free to shoot me down.

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Just a thought

Were told the boj reduced rates to get the japs spending.

On the other hand were told that the average jap is a very keen saver.

Am I missing something here?

Surly if the average jap had a stack of money in the bank he would be encouraged to spend more if rates were higher (ie more interest from his savings, making him feel wealthier)

Could the plan have been much bigger and ambitious – ie to get the whole world spending following the dot com bubble and later 9/11. (whether this was the plan or not – it seems to have been the outcome).

Could it have been done in a World Bank/ G8 nudge nudge wink wink kind of a way?

As I say – it’s just a thought

Feel free to shoot me down.

The low rates were to counter deflation due to Japanese (not Japs, please) not spending enough. For a long time it didn't work. Now, though, deflation is coming to and end (positive for seven month), GDP is growing again and companies are investing heavily. That first enable the BOJ to abandon its quantitative easing programme and will soon lead to them raising rates.

Surly if the average jap had a stack of money in the bank he would be encouraged to spend more if rates were higher (ie more interest from his savings, making him feel wealthier)

No. If rates are higher, people have a greater incentive to save. That's why they lowered rates in the first place.

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The Jap commercial banks have already made their move--its inevitable now. Batton down the hatches lads its going to be rough seas for awhile!

http://search.japantimes.co.jp/cgi-bin/nb20060708a8.html

Saturday, July 8, 2006

Mizuho to hike time deposit rates

Mizuho Bank announced Friday it will raise interest rates on three- and six-month time deposits starting Monday,
marking the first hike since August 2000 on deposits held less than a year.
The rate will be lifted from 0.02 percent to 0.06 percent for three-month time deposits and from 0.02 percent to 0.1 percent for six-month deposits, the bank said. Interest rates on ordinary deposits will be left unchanged at 0.001 percent.
The move comes in the wake of rising short-term market rates on expectations that the Bank of Japan will shortly scrap its "zero-interest-rate" policy.
Other major banks are expected to follow suit. Major banks posted record earnings in fiscal 2005, which ended on March 31, and there is growing demand from depositors that part of the profits be returned in the form of higher interest rates.

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The Jap commercial banks have already made their move--its inevitable now. Batton down the hatches lads its going to be rough seas for awhile!

Rising rates is always good :rolleyes:

Ive been following this thread and could someone please explain the following ? (This maybe one for you RB)

In some of the links they mention an "overnight interest rate". In what way is this diffent to a normal interest rate?

If Japan lowered rates to get people spending it didnt seem to have worked since they were all still saving and didnt buy houses because prices kept falling. How did the money come out of Japan. Did the big Japanese banks borrow from the central bank and spend overseas? If this was the case why didnt they stop this because it obviously isnt going to get the people in Japan spending.

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The Jap commercial banks have already made their move--its inevitable now. Batton down the hatches lads its going to be rough seas for awhile!

Rising rates is always good :rolleyes:

Ive been following this thread and could someone please explain the following ? (This maybe one for you RB)

In some of the links they mention an "overnight interest rate". In what way is this diffent to a normal interest rate?

If Japan lowered rates to get people spending it didnt seem to have worked since they were all still saving and didnt buy houses because prices kept falling. How did the money come out of Japan. Did the big Japanese banks borrow from the central bank and spend overseas? If this was the case why didnt they stop this because it obviously isnt going to get the people in Japan spending.

Lookup the yen carry trade it will explain where all the yens that were bought went.. into the rest of the world through investors.

it also helped business investment in Japan hence the economy growing again. With strong growth comes inflation. inflation without growth is stagflation. No/minus growth and little/no inflation is recession (economy in reverse).

What i want to know is how high will IR's have to go in Japan before the carry trade is no longer an effective form of investment:-

Buy a yen at 1%, invest in say the pound/dollar asset at 5%, sell the investment vehicle at say 10% profit. Pay off the yen loan but this will only be detremental if the yen has increasd in value.

How high does BOJ IR need to go before the yen increases in value and the affects realised and deemed uneconomical?

Edited by Impartial

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  • 302 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% +
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      • Even
      • up 2.5%
      • up 5%



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