Friday, July 14, 2006

 

BOJ Ends 'Abnormal Situation'

Bloomberg reports on the BOJ meeting. "The Bank of Japan raised interest rates for the first time in almost six years, forecasting sustained growth in the world's second-largest economy and an end to a decade of deflation. Governor Toshihiko Fukui and his policy-board colleagues increased the benchmark overnight rate between banks to 0.25 percent from almost zero, the bank said in Tokyo today."

"The central bank is raising rates, still the lowest among the Group of Seven nations, to avoid the excesses of the 1980s bubble economy that was followed by a collapse in land prices and three recessions. Bonds rose and the yen fell as the central bank said it may keep rates 'very low' to support growth driven by the fastest pace of corporate spending in 16 years."

"'Maintaining the zero-rate policy could cause large swings in the economy and prices in the future,' Fukui said. 'Future adjustment of interest-rate levels will be made gradually' with consideration to the economy and prices, which the bank expects to keep rising, he said."

"The government opposed the bank's last rate increase in August 2000. Seven months later, the bank had to cut rates back to almost zero as an Internet-led global economic boom faltered. The central bank today said it will keep buying 1.2 trillion yen in government bonds from commercial banks, a policy tool that has been used to provide funds to the banking system and which has helped avoid gains in bond yields."

Comments:
'The central bank today said it will keep buying 1.2 trillion yen in government bonds from commercial banks, a policy tool that has been used to provide funds to the banking system and which has helped avoid gains in bond yields.'

I wasn't aware that this was going on. We really live in a bizarre age when 'money' has almost no cost and can be used to buy debt in a circular manner. No wonder so many corporations have decided to stop producing anything and become lenders.
 
like Ford and GM. the joke about those two is that they are healthcare companies. nah, they're banks who provide healthcare and happen to produce cars.
 
thejdog,

Aren't you pretty much back to even now??
 
I'm surprised (and incredibly relieved) that this news didn't seem to have a massive effect on markets. Then again, it was widely expected.

Last time the BOJ opened its mouth, markets plunged for a solid week. I had my mouse poised on the sell button for an hour this morning, ready to sit-out any potential carnage. So far, its seems relatively contained.

On the plus side, rates in Japan are still incredibly low. The central bank's efforts to provide liquidity to commercial banks by buying their bonds seems like a strong precaution to take when liquidity is still (relative to everywhere else on the planet) extremely plentiful.
 
ben,

I used to laugh at writers who talked of a 'ponzi scheme' used to buy debt with cheap money. I am not laughing any more, as their predictions and analyses seem to be increasingly borne out as true. Unfortunately for the world, all ponzi schemes fail when the latecomers realize they are being had. Not concidentally, gold is holding over $660.
 
We really live in a bizarre age when 'money' has almost no cost and can be used to buy debt in a circular manner.

Realizing this, is there any other argument even necessary to physically hold PMs????
 
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?