Isn't it most likely that Citibank's Japanese deposits would end up, for the most part, in very low risk government debt?
If you were able to get loans (i.e. deposits) and pay only 1.0% you would be happy to invest in U.S. T-Bills. Citi is more sophisticated, of course, and would probably invest in lots of AAA bonds - govt. & multi-national and completely hedge the currency risk and maturity mis-match.
They would not invest much directly in stock markets and they would not gear up their loan departments due to the fixed cost nature of employees. I think the Latin America memories are still quite vivid, so I don't see them getting very speculative.
What will happen, I 'm guessing, is that, as water finds its natural level, the spread between interest rates in Japan and those in the U.S. & Europe will lessen. Rates in the West would lower, while those in Japan would rise. This would increase equity valuations in the West and decrease in those in Japan and the East.
Higher interest rates will force the Eastern economies to become more efficient and scale back government subsidized industry. Profitability will be slammed, especially for Nissan and other leveraged industrials, and equities will therefore fall dramatically.
Subsidies and central planning, if allowed to persist beyond the time of absolute need, cause inefficiency, which mounts and mounts until it's impossible to maintain.
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