Howard, Interest rates got so low because they have never had inflation and they had the only strong currency for so long and they save more than any people on Earth. The problem is cultural. Our Treasury would like Japan to solve their problems with American solutions. In America, nobody saves, so you print a bunch of worthless paper and lower rates and people go into to debt to spend it and everyone feels richer when they really owe their soul to the co. store.
In Japan, where folks are saving like crazy, lower rates mean they have to save more to reach their goals. That kills consumption and the domestic economy. If you raise rates, you not only increase spending, you bring home dollars invested abroad and you give the battered banking system spreads where they can make money.
The Japanese recognize this. However, when they raise rates, it absolutely flattens the bloated dollar and the US starts talking tariffs. So, with spines like jellyfish, they lower again and kill their own economy to stay friends with their largest trading partner and military protector.
My guess is, sooner or later, you get somebody in Japan with some iron in his soul and sayonara, US dollar and bond rates and stocks and hello Nikkei.
MB |
