Friday, July 14, 2006

ZIRP Over - Japan Raises 25 bps

From Bloomberg:

BOJ Raises Rates for First Time in Almost Six Years

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 effective immediately, the bank said in a statement in Tokyo today. The decision was unanimous.

By ending the zero-rate policy, the Bank of Japan is seeking to avoid the excesses of the bubble economy that was followed by a collapse in land prices in the 1990s and three recessions. Bonds rose and the yen fell as the central bank said it may keep rates ``very low'' to support an economy driven by the fastest pace of corporate spending in 16 years.

``Zero interest rates in the long run place the wrong incentives and make for an inefficient allocation of scarce resources,'' said Jan Lambregts, head of research at Rabobank Groep in Singapore. The world's central banks were concerned companies would become ``addicted to such low rates.''
``The zero-rate policy was an abnormal condition,'' said Kunio Nakamura, chairman of Matsushita. ``Japanese companies have made efforts to decrease debt in the past 10 years so many companies won't be affected by the rate hike.''


Blogger grim said...

Does this move drive a stake through the heart of the Yen carry trade? If so, could this be the end of Greenspan's conundrum?


7/14/2006 06:49:00 AM  
Blogger njdoc said...

Not a stake, but certainly a splinter. Rates will have to be moved up more to turn it into a stake.

7/14/2006 08:55:00 AM  
Anonymous Anonymous said...

the carry trade boys are finished.

7/14/2006 02:59:00 PM  
Anonymous Anonymous said...


I am actually glad to see the moce.


7/14/2006 08:00:00 PM  

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