Friday, December 30, 2005


Will Higher Japanese Rates Hurt US Dollar?

Bloomberg reports on a bond market that could spell trouble for the US dollar. "Japan's 10-year government bonds fell for a third year, the longest such stretch since 1990, on signs the world's second-largest economy is nearing an end to deflation."

"Consumer prices rose last month for the second time in seven years, laying the ground for the central bank to change its five year policy of pumping cash into the economy and keeping interest rates at almost zero."

"Benchmark 10-year yields rose 3.5 basis points this year to 1.470 percent, according to Japan Bond Trading Co., the nation's largest debt broker. Yields climbed 57 basis points over the past three years, the biggest jump since a 260 basis-point surge from 1988 to 1990. A basis point is 0.01 percentage point."

"Bank of Japan Governor Toshihiko Fukui on Dec. 8 said his board is 'close' to ending its policy of adding cash into the banking system."

"'Weak U.S. housing data fueled concern of a U.S. economic slowdown, triggering buying of bonds,' said Tsutomu Kawasaki in Tokyo, a fund manager who helps oversee the equivalent of $9.18 billion in Japanese bonds."

A worldwide surge of foreign investment in Japan (especially from US) will keep their stocks inflated enough to reflate those yields. How do you say inflation in Japanese?
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