JB,
"Free money almost!"
Well, not if you factor in their deflation. If they have deflation of 5%, then a rate of 0.25% is really 5.25%. I don't know what the rate really is, impossible to measure I'm sure just like almost everything else in an economy which is so distorted by their convoy system. They can't even begin figure out what their bad loans are.
I found these paragraphs (especially the second) particularly interesting, from the article you linked in your previous post:
<<In a sign of growing concern about Japan's ailing economy and fragile banking system, Japan's central bank said on Wednesday
that it would guide the key overnight call rate down to about 0.25 percent from the previous target of ''somewhat below'' the
0.5 percent official discount rate.
The Bank of Japan -- in its first monetary policy change in almost exactly three years -- also said it would seek to expand money
supply by providing ample liquidity and increase liquidity injections if needed regardless of the call rate -- the rate at which
private banks lend to each other overnight and the Bank of Japan's main policy tool.>>
This will be an interesting test of Milton Friedmans oft repeated comment that "deflation is the easiest thing in the world to cure, just increase the money supply". I have always thought he ignored the psychological/crowd aspects of inflation and deflation. Japan has an older population who have been through hell and back. As a people, they worked hard to build prosperity after the devastation of WWII, and now they may live to see how it all could be squandered.
So many golf courses and face saving, so little real cash and facing of reality. |
