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Realistbear

Bank Of Japan Says No

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http://news.bbc.co.uk/1/hi/business/5326126.stm

Last Updated: Friday, 8 September 2006, 06:26 GMT 07:26 UK
Japan's central bank has kept interest rates unchanged for a second consecutive month.
Members of the central bank opted unanimously to maintain the benchmark rate at 0.25%, as expected.
When rates were raised in July, after six years of zero interest rates, the move was seen as a sign of confidence in the strength of the economy.
However, recent consumer price figures have indicated that inflation may have been less than previously thought.
'Downward trend'
Consumer price figures for August have been revised downwards significantly.

Japan missed out on the last 10 years of irrational exhuberance but they may not miss the next few years as the debtor nations begin paying for it all. Japan's economy is in an interesting position.

Edited by Realistbear

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http://news.bbc.co.uk/1/hi/business/5326126.stm

Last Updated: Friday, 8 September 2006, 06:26 GMT 07:26 UK
Japan's central bank has kept interest rates unchanged for a second consecutive month.
Members of the central bank opted unanimously to maintain the benchmark rate at 0.25%, as expected.
When rates were raised in July, after six years of zero interest rates, the move was seen as a sign of confidence in the strength of the economy.
However, recent consumer price figures have indicated that inflation may have been less than previously thought.
'Downward trend'
Consumer price figures for August have been revised downwards significantly.

Japan missed out on the last 10 years of irrational exhuberance but they may not miss the next few years as the debtor nations begin paying for it all. Japan's economy is in an interesting position.

As I mentioned on another post, this isn't a big deal. The economy is doing very well and corporate profits were well ahead of target during the last quarter. All that happened was that CPI was lower than expected in the last quarter after a five yearly review of the CPI components was made. Changes made for a lower CPI. In any case, no one expected the interest rates to rise this month. All along the expectation has been one more rise this year or early next. Figures releases earlier this showed corporate investment was very strong. Once the CPI edges up a bit more, the next rise is likely.

Edited by i_godzuki

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Guest Alright Jack

Monor correction to your title:-

"Bank Of Japan Says No, IR held as they are not out of the doldrums yet"

"Bank Of Japan Says No, IR held as the US (and UK) are not out of the doldrums yet."

Japan are simply helping us to inflate our problems away. They print the money and buy US treasuries. This way the inflation (though it shows up the real world ultimately in commodities - and homes!) does not show up on the exchange tables since the devaluation is taking place simultaneously. The carry trade itself is the engine driving bond purchasing because who cares about currency depreciation when there is an arbitrage spread like this one to make money from.

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Japan, is amongst other things, far less importent the great scheme of things than it was before it went into its long economic malaise.

Perhaps, but it remains the world's second largest economy and largest creditor nation.

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Japan, is amongst other things, far less importent the great scheme of things than it was before it went into its long economic malaise.

???? :huh:

What the Japanese does will effect every other country, they are now the most important country economically. If they put interest rates up significantly then there will be a crash no matter what else happens. There would be no cheap money available which is a vital part of the property bubbles in the UK, Eire and other countries.

Japan is the lender for the whole world. The US and the UK are both borrowers.

I thought everyone knew this??

Let me try and explain further

UK interest rates go to say 6%, this is quite significant but not vital as it will only have a small effect on mortgage rates as this rate is used as a guide (tracker for example) by domestic lenders, but as long as the domestic lenders have access to cheap money they will push money at UK homeowners at "competative" levels (what they can get away with) which could easily be 2% below BofE rate which is simply an overnight rate. Even at these rates it could be lucrative lending.

Japanese rates go up to say 2%. All the world asset bubbles collapse.

I am sure I do not have to explain why........do I?

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???? :huh:

What the Japanese does will effect every other country, they are now the most important country economically. If they put interest rates up significantly then there will be a crash no matter what else happens. There would be no cheap money available which is a vital part of the property bubbles in the UK, Eire and other countries.

Japan is the lender for the whole world. The US and the UK are both borrowers.

I thought everyone knew this??

Let me try and explain further

UK interest rates go to say 6%, this is quite significant but not vital as it will only have a small effect on mortgage rates as this rate is used as a guide (tracker for example) by domestic lenders, but as long as the domestic lenders have access to cheap money they will push money at UK homeowners at "competative" levels (what they can get away with) which could easily be 2% below BofE rate which is simply an overnight rate. Even at these rates it could be lucrative lending.

Japanese rates go up to say 2%. All the world asset bubbles collapse.

I am sure I do not have to explain why........do I?

that would be fine, but the US actually controls Japan not the other way round, and that's regardless of who is lending to whom.

there is something of a misconception that Japan acts in any way independently. They do not, and are mere satellites of the US.

Edited by Milkshock

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???? :huh:

What the Japanese does will effect every other country, they are now the most important country economically. If they put interest rates up significantly then there will be a crash no matter what else happens. There would be no cheap money available which is a vital part of the property bubbles in the UK, Eire and other countries.

Japan is the lender for the whole world. The US and the UK are both borrowers.

I thought everyone knew this??

Let me try and explain further

UK interest rates go to say 6%, this is quite significant but not vital as it will only have a small effect on mortgage rates as this rate is used as a guide (tracker for example) by domestic lenders, but as long as the domestic lenders have access to cheap money they will push money at UK homeowners at "competative" levels (what they can get away with) which could easily be 2% below BofE rate which is simply an overnight rate. Even at these rates it could be lucrative lending.

Japanese rates go up to say 2%. All the world asset bubbles collapse.

I am sure I do not have to explain why........do I?

Sorry - I didn't make myself clear. i agree with this, but was really referring to the role now played by China, and its relationship with the US. A more significant risk in terms of destabilising world economy in short-medium term IMO. i.e. I don't see Japanese rates shooting up to 2% any time soon.

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UK interest rates go to say 6%, this is quite significant but not vital as it will only have a small effect on mortgage rates as this rate is used as a guide (tracker for example) by domestic lenders, but as long as the domestic lenders have access to cheap money they will push money at UK homeowners at "competative" levels (what they can get away with) which could easily be 2% below BofE rate which is simply an overnight rate. Even at these rates it could be lucrative lending.

I think this may be optimistic. As a tactic, it can only be used on a short-term basis - and even that would raise some eyebrows among shareholders IMO. But a 6% UK IR would, even with the above tactic, see house prices falling IMO, not least because of the state of the wider economy suggested by a 6% IR. So you are effectivley offering to subsidise the purchase of assets which have a high risk of being worth less in the future. I doubt banks will be as keen to follow this strategy as you suggest.

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that would be fine, but the US actually controls Japan not the other way round, and that's regardless of who is lending to whom.

Where did you get this notion?

How do you think they do this?

There is a theory that the Chinese have sold goods to the west at such ridiculously low price levels for such a long time in such a large scale simply to undermine the west. Whether they have done this on purpose or not they now control the west in the only way that matters, economically.

Make no mistake the US and UK are now in dire straights economically, we have lost all perspective of what a long term viable economy requires. In the UK It is now believed that having nil manufacturing capability or only producing 20% of our food consumption somehow makes economic sense.

Someone needs to point out that this may put us in a slightly vunerable position.

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Where did you get this notion?

How do you think they do this?

There is a theory that the Chinese have sold goods to the west at such ridiculously low price levels for such a long time in such a large scale simply to undermine the west. Whether they have done this on purpose or not they now control the west in the only way that matters, economically.

Make no mistake the US and UK are now in dire straights economically, we have lost all perspective of what a long term viable economy requires. In the UK It is now believed that having nil manufacturing capability or only producing 20% of our food consumption somehow makes economic sense.

Someone needs to point out that this may put us in a slightly vunerable position.

japan relies on western trade, and it can also count on us support to gain geo-political favours re. local issues. anyone who cannot see this is blind.

the idea that china contrls the west is also ridiculous in the extreme.

Edited by Milkshock

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???? :huh:

Japan is the lender for the whole world. The US and the UK are both borrowers.

I thought everyone knew this??

Let me try and explain further

Japanese rates go up to say 2%. All the world asset bubbles collapse.

I am sure I do not have to explain why........do I?

I do not know this quite as well as I should, or hardly at all. Please could you put me right?

Are you saying that if JGB rates go up significantly then local investors will keep their money in yen, rather than investing overseas in our gilts or US treasuries?

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I think the expectation is that Japan will increase rates by about .25% a quarter as the economy mergers from deflation. If that was the case, 2% will be here but not for a couple of years.

While it's true that Japan is reliant on the West for exports, it's unlikely they'd keep rates too low for too long to protect foreign economies. After all, some economists have said that Japan has actually acted in haste in raising rates to 0.25% and are unsure why the BoJ is worried about inflation getting over 1%.

Regarding the U.S, there is obviously a close relationship, but Japan is hardly just a satellite. The relationship is clearly a two-way affair given the impact of Japanese investment on the U.S. economy.

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I do not know this quite as well as I should, or hardly at all. Please could you put me right?

Are you saying that if JGB rates go up significantly then local investors will keep their money in yen, rather than investing overseas in our gilts or US treasuries?

You are in some way correct. But the Japanese banking system should be differentiated from the Japanese people. When the JBR is increased and there is a greater demand from the "local" businesses and consumers for credit then there will be greater competition for this money, there will be the choice for the banking sector to invest internally in the 2nd richest country in the world with sound economic foundations at increasing returns of interest (profit) or to continue pumping money through the international "carry trade" at a increasingly poor return of interest, in comparison, with increasing risk of default as rates increase with overstretched borrowers.

Yes I believe much of this money will be repatriated as this global lending is seen to be a temporary phenonomen albeit a protracted event.

The gilt/treasuries markets will also be effected with rates increases. The US are already preparing themselves with rates increasing for the last 18 months and likely to increase further.

If you have not read it before check out the following thread raised by realistbear on 10th April which showed one of the first Japanese bank rate increases in this cycle

http://www.housepricecrash.co.uk/forum/ind...amp;hl=JAPANESE

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oh go on. You know you want to.

OK

over a year late but better late than never

If BoE base rate say were raised to 5.75% or 6% (easy in hindsight) but the money in the carry trade market place was expensive mortgage rates could be much higher than base rates although then (last year) it was the other way around.

In effect the BoE is only the rate the BoE sets and if out of step with the markets it can be ignored.

It makes it easier to explain now as it is has happened.

That is why interest rates can be high even in a deflationary recession period. Check out rates during previous recessions.

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  • 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%



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