Friday, Jul 14, 2006

Japan Interest Rates

BBC News: Japanese rates increased to 0.25%

Japan's central bank has raised its key interest rate from 0% to 0.25%, its first increase in nearly six years.

The widely-anticipated move was announced by the Bank of Japan at the end of a two-day meeting.

The move signals the Bank's confidence in the strength of the Japanese economy, which has seen accelerating growth and falling unemployment.

It also marks a significant shift in monetary policy, away from tackling deflation.

Posted by jason @ 07:51 AM (1946 views)
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15 Comments

1. Paul said...

That's oddly familiar pong is the smell of pure fear emanating from the trouser hems of London's currency traders.

Friday, July 14, 2006 08:29AM Report Comment
 

2. Surfgatinho said...

Bring it on!
I'm not dumping my Japanese funds as I think Japan can weather this - anyway, can't think of any other equity markets I'd want to be involved in at the moment. At least Japan are calling the shots at the moment

Friday, July 14, 2006 08:54AM Report Comment
 

3. Blindleadtheblind said...

Surf...as rates rise markets fall, you are either brave or naive, but dont make the mistake of thinking you have to be invested all of the time, sometimes sitting and doing nothing is a much wiser move. This BOJ move will force the hand of nearly all cental banks to raise, any suprise moves to the contrary will see the currency in question hammered...ergo more inflation for the country in question...you reap what you sew

Friday, July 14, 2006 09:28AM Report Comment
 

4. Indiablue19 said...

Oh dear, is that a bow wave I see on starboard side? Time to turn in your funny money, whether it be stashed in your house "value," under the bed, or in derivatives. Time to start gathering up all that extra paper money that was printed. Time for Crash to get on his shiney helmet....no, make that two helmets.

Friday, July 14, 2006 12:25PM Report Comment
 

5. talking rot said...

Hang on.

Yes I can see the rise in Japan's interest rates will damage the yen carry-trade. But it is a very small rise. With interest rates in the US at over 5%, how can this small rise make a difference?

Globally inflation is creeping up but it is a long way off causing a crisis yet. For example, it hasn't even started to effect the UK yet or our interest rates would be heading north. (I am aware of the issues regarding the CPI!)

There are risks but risks may, or may not, happen ...

No HPC yet (sadly)

Friday, July 14, 2006 03:41PM Report Comment
 

6. Membrane said...

Being devil advocates here but why will markets fall if interest rates go up, it certainly wasn't the case as the interest rates went down (1999 to 2003 )or are you saying markets go down if IR's go up or down ?????

also an increase from .1% to .25% is only a 250% rise that's not massive at all is it ????

Friday, July 14, 2006 04:04PM Report Comment
 

7. Such_short_memories said...

Its actually a 2,500% rise.

Friday, July 14, 2006 04:44PM Report Comment
 

8. Such_short_memories said...

Not its not. Sorry.

Friday, July 14, 2006 04:45PM Report Comment
 

9. markd said...

Its not so much the level of the increase in rates in Japan that is the cause for concern for the carry trade, given that there is indeed a major difference between rates there and elsewhere. What is a concern is the ongoing appreciation of the Yen (against the currencies in which the carry trade funds are invested) that is likely to follow on from the rate rise. This will make it more expensive to repay the loans, possibly wiping out any gain made and as a result reducing worldwide liquidity as the trade dries up.

Friday, July 14, 2006 04:49PM Report Comment
 

10. Indiablue19 said...

Markd, I'm with you.

Friday, July 14, 2006 04:56PM Report Comment
 

11. Freewheeling Franklin said...

and there's talk of 4 more rises by year end - which would presumably leave rates at 1.25% if the talk proves true. If that comes to pass thenit might have some impact as a 1% rise in the cost of borrowing in the UK would most certainly be felt by those who've overextended themselves most

Friday, July 14, 2006 05:19PM Report Comment
 

12. paul said...

That's it. This really is the death knell for the carry trade on which global cheap credit is based. Even the prospect of the carry trade finishing could have investors rushing for the door.

Friday, July 14, 2006 05:58PM Report Comment
 

13. C'mon Correction said...

I've been reading the news blogs on this site daily for quite a while now but not posted til now. The first real signs of a correction starting out over the next 2 years seems to be in the news lately. I see the current housing market as a flogged horse (by the the VI's, government etc) that is soon gonna give up. A HPC to fully materalise will need a trigger that will 'force the hand' - I think the VI's will still have control over public opinion until then - with inflation moving upwards and cheap credit vanishing (which will/has start from the Yen) this could be encouraging. Can anyone shed some light on why Sterling is so (relatively) strong? It seems to me in sync with strong oil prices - is it this factor alone?

Friday, July 14, 2006 06:06PM Report Comment
 

14. harold said...

Yes, that's why particularly emerging stock markets (i.e., high risk) have been badly hammered recently. Anyone for the Karachi KSE-100, down nearly 20% since April? Perhaps not.

Friday, July 14, 2006 11:12PM Report Comment
 

15. Blindleadtheblind said...

membrane lol...better you look at a timeframe of more than 3/4 yrs as you will see a far clearer picture. The Fed reserve rased rates in 99/2000 preceded the nasdaq tech bust that followed 2000/2001..then lowered rates to 1%, the stock markets rallied..

Saturday, July 15, 2006 06:19AM Report Comment
 

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