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Japan brings negative interest rates era to an end with first hike in 17 years
- GrumpySloth 3y agoWhy is this reported from “Hong Kong (CNN)” and not Tokyo? Does it mean CNN has a local branch in Hong Kong, but not in Tokyo?
- infecto 3y agoProbably. Historically HK was the financial hub of this region and would probably make sense to have a central office here as opposed to Tokyo.
- GrumpySloth 3y agoI’ve just checked and Wikipedia claims they have a branch in Tokyo. Maybe I don’t understand what those headers in newspapers mean then.
- tokai 3y agoIts not that deep. Laura He writes about Asian markets and business. Laura He lives in Hong Kong. No reason to get someone living in Tokyo to write the article if Laura He has the expertise, just to get some location header "correct".
- infecto 3y agoIts simpler than that, "Hong Kong, China (Asia Pacific regional headquarters)" is what the wikipedia page lists for CNN.
- tokai 3y agoWhats your point? That doesn't add or simplify anything. The point is that there is nothing weird in an article about japans economy is published from Hong Kong.
- deleted 3y ago[deleted]
- actuallyalys 3y agoYes, this is the correct explanation. Datelines are generally based on the writer’s location. I don’t know for sure that’s CNN policy, but it’s AP policy, which is widely followed.
- infecto 3y agoI don't know why I am chasing this one because it ultimately does not really matter to either of us but I wanted to. In Japan it looks like they have CNNj which afaik is the japanese translated version of CNN. In Hong Kong I suspect they have an actual office for editorial staff, especially someone that works on the business/finance side of reporting. It would probably not be very interesting to have a business correspondent stationed in Japan from a CNN perspective.
- neves 3y agoCNN franchises around the would are something completely different. If you thing CNN is bad, it is because you because you never watched its franchises. The one from Brazil is a far right news outlet that disseminates fake news.
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- CPLX 3y agoThe story was written by a human. The dateline at the top of a news story clarifies where that human actually is. It was probably more impressive and relevant in 1930 but the convention remains for the most part unchanged.
- dagoodnews 3y ago> Historically HK was the financial hub of this region Japan was once the 2nd largest economy in the world. It had an economy bigger than china and south east asia combined. Historically, Japan was its own financial hub. Not to mention Japan developed before hong kong did. Also, Japan isn't geographically near hong kong.
- infecto 3y agoOk, "most recent history". Japan just went through the 3 decades of lost growth.
- detourdog 3y agoI'm really interested to watch this play out. Since I was a teen Japan went from taking over the USA. The watermark might have been when Japanese banks bought Rockefeller Plaza. They just spent a whole generation at zero interest. This is really exciting to see the effects of the cost of borrowing. I see this as very different than what the US just went through. I want to see what happens to growth. I have been thinking that the US managed to turn the COVID disruption into a soft landing.
- seanmcdirmid 3y agoI believe Japan went zero/negative interest after their real estate bubble spectacularly imploded, not before (we are seeing history repeat in China, but much worse). But Japanese lending has always been supported by personal postal savings at low interest rates.
- detourdog 3y agoWhat is postal savings.
- seanmcdirmid 3y agohttps://en.wikipedia.org/wiki/Japan_Post_Bank https://en.wikipedia.org/wiki/Japan_Post_Bank
- detourdog 3y agoI thought those were pretty normal. I didn't think it would have a specific effect in Japan.
- seanmcdirmid 3y agoThat a huge amount of the country's savings was locked up in state managed postal savings accounts is not normal to most countries, which is why the history section of the wikipedia article is interesting reading. From the article: > The importance of the Japanese postal banking system lies not just in providing a savings vehicle and financial services to the people of Japan, but also in the use of the saved funds to promote economic development throughout modern Japan's history. ... > To promote savings which could be invested into rebuilding the economy, Japanese officials issued relentless statements advocating for austerity and instituted measures to restore confidence in the financial system.[10][4] From the 1950s, postal savings experienced steady growth and increased its market share relative to private banks, thanks to the huge availability of postal offices, attractive financial products offering good returns and preferential tax treatment on deposits from the government.[11][4]
- okasaki 3y agoIt's written by Laura He, and if you click through to her bio it says she's based in Hong Kong.
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- alephnerd 3y agoTo add on to the commentators below, Foreign Bureaus are increasingly shutting down and being replaced with freelancers [0] A lot of the degradation in "MSM" appears to be due to the severe cost cutting occurring within News Organizations, leading to more sensationalism, less hard reporting, and way less editing and fact checking. And this is happening in the UK (BBC layoffs, Guardian almost exclusively using freelancers), Canada (CBC layoffs, BCE layoffs), and much of Western Europe as well. The era of Amanpour reporting in the middle of a warzone are long gone, and non-Western alternatives are government owned and share similar biases (eg. Al Jazeera and anything remotely related to Qatar's mortal archrivals Saudi or UAE, CGTN and China's world view, WION and Indian media's tendency to overexaggerate, etc). [0] - https://www.american.edu/soc/news/with-foreign-bureaus-slashed-freelancers-are-filling-the-void-at-their-own-risk.cfm https://www.american.edu/soc/news/with-foreign-bureaus-slash...
- selimthegrim 3y agoWION isn't S Korean?
- mettamage 3y agoSo does this effect on its own mean that the yen becomes more expensive compared to the US dollar?
- TheDong 3y agoIf you're able to predict with high confidence how this effects the yen/usd rate, then you can make a huge amount of money on fx arbitrage. We don't really know how this will play out, and people's guesses for how it will play out are to some degree already priced into the current rate.
- stale2002 3y ago> If you're able to predict with high confidence how this effects the yen/usd rate, then you can make a huge amount of money on fx arbitrage. Thats not true. It could be the case that the effect of interest rates on exchange rates is obvious to everyone, and therefore it is already priced in. Interest rates are not an obscure, arcane thing. Lots of people in finance know how they work, and know how they effect various parts of the economy.
- dkarras 3y agoOP is talking about future predictions though, not "priced in" stuff. If you are able to predict (predict being the key term here, you are predicting... the future) the exchange rate, you can make a lot of money, yes.
- seanmcdirmid 3y agoJapanese housewives were famous for carry trade on low Japanese interest rates or discrepancies in exchange rates (taking out loans in Japan, lending money outside of Japan). See: https://documentwomen.com/mrs-watanabe https://documentwomen.com/mrs-watanabe If you can identify a flaw in a government's monetary strategy, you can always do some arbitrage to take advantage of it, and people do that.
- caddemon 3y agoIt seems a small raise but yeah theoretically raising interest rates should strengthen the currency to USD, because with higher interest rates there is less reason to move the currency to USD. That's just the first order effect though.
- roenxi 3y agoIn some sense this sort of article confuses me. This is a different economy, with its own legislative framework and where the people speak a language that is not English. But the frame is that they are basically a clone of the US and a policy change in Japan is equivalent to the policy change that sounds the most similar in the US. And even in English speaking countries, the frame that interest rates are like a little knob that the central planning committee adjusts is suspect. How the rate is influenced is quite important too. There is so much context required to interpret this, it really needs to be part of a "Japan Economy" wiki rather than a stand alone article. But best of luck to Japan. Nobody ever asks for my opinion, but IMO it'd be sensible to let the markets set the interest rate. The evidence that markets are weak at setting interest rates is itself quite flimsy.
- verticalscaler 3y agoWelcome to CNN.
- rafram 3y agoI mean, the article did a pretty good job of explaining the situation to a general financially-savvy audience considering how complex it is.
- athrun 3y ago> IMO it'd be sensible to let the markets set the interest rate I'm not sure what you mean by this. The interest rate policy is linked to the money creation/destruction process, which is ultimately a centralised state function. Banks create/destroy the money, but the pace at which they can do so is governed by interest rates. I don't understand how the market would be able to set that rate. You'd need multiple entities acting as "central banks", and somehow competing? What do you have in mind?
- roenxi 3y agoI'd prefer to see a policy where either the schedule for monetary creation was publicised several years in advance, or where a constant amount of money in the economy was targeted rather than a specific interest rate (I'd go with the former, it seems harder to game). We've actually got exactly that in Bitcoin which is making it an interesting experiment for me, although it is too cumbersome to act as money we'll get to see how that sort of system performs in a market. The idea that it is proper to adjust the rate of monetary creation based on the market is suspect. It can't create wealth, it can create confusion and is looks suspiciously like a distortion that results in asset owners becoming wealthy at the expense of someone else. Asset prices appear to inflate more in line with the M2 - somewhat faster than the CPI, suggesting that asset owners are getting more benefits from this policy than anyone else. I don't see why they need an extra boost given that they already own productive assets. Basically; at the moment the system is designed to penalise anyone who tries to preserve wealth in actual cash and as collateral damage prices keep eternally climbing. Neither of those things is helpful and if anything it just makes it harder for people to make rational decisions. It is confusing policy with no theoretical upside that has been drawn to my attention.
- imp0cat 3y agohttps://japanoptimist.substack.com/p/go-for-it-ueda-sensei https://japanoptimist.substack.com/p/go-for-it-ueda-sensei Japan will not just end the world's last zero rate anchor, but will sooner rather than later begin to focus on containing rising inflation risks
- barrenko 3y agoCould someone provide a factual summary?
- batch12 3y ago> the Bank of Japan (BOJ) raised interest rates for the first time in 17 years, lifting its short-term rate to “around zero to 0.1%” from minus 0.1%, according to a statement posted on its website on Tuesday
- barrenko 3y agoThanks!
- lupire 3y agoIs 0 meaningful as a boundary? It has nice numeric properties, but does it have real world impact? To the extend that it does have real word impact, is that because positive different from negative or just the absolute value equal to zero is different from nonzero?
- lkrubner 3y ago"Pushing on a string." Generally speaking, investors won't invest if you promise to lose their money. Or if you promise to destroy their money. Or if you promise to steal some of their money. Most of the time, investors hope to make a profit. So you can cut interest rates to zero, but you can't cut it much below zero. A big surprise of the aftermath of 2008 is that investors will, in fact, tolerate a slightly negative interest rate. Big investors with tens of billions of dollars cannot simply take the money as cash, they need to put it in a bank, so if a bank imposes negative 0.1% then some investors simply consider that a fee for storing the money, so it was, in fact, possible to go slightly below zero. But the problem was, there was no way to go deeply below zero. In the USA in 2009 it was estimated that we would need an interest rate of negative 6% to get back to full employment. And of course, no investor will voluntarily take such a loss on their money. That's why monetary policy has limits. That why financial policy has to be used. However, a coalition of Republicans, along with a handful of key Democrats, such as Larry Summers, moved to block all financial policy, so we suffered several years of high unemployment. Japan, of course, had it worse than the USA, as they are also facing demographic contraction. In their case, they used monetary policy and some financial policy, but all of it together barely offset the demographic contraction of working age adults that they have faced.
- incomingpain 3y agohttps://www.marketwatch.com/investing/bond/tmbmkjp-10y?countrycode=bx&mod=home-page https://www.marketwatch.com/investing/bond/tmbmkjp-10y?count... Looking like they have made some improvement. Not a bad curve, but a ton of improvement needed. Not in GDP though. 265% debt to gdp is absolute bananas. They still havent balanced their budget. 56% income tax rate is crazy. Then they have to deal with major population decline and aging population; without immigration? So um are they planning to cure death or something? Like anti-aging drugs or something? So perhaps they can turn their aging population into young population? Something extreme like that is Japan's only hope at this point.
- staticman2 3y agoJapan ranks number 3 in the world in life expectancy. United states is 47. Japan seems to be doing just fine so far.
- mproud 3y agoThere was an article a short while back explaining how older people in Hapan who died weren’t being reported, because younger family members were collecting their social security, and that these deaths weren’t being accounted for and inflating the reported life expectancy number.
- aidog 3y agoAs a Japan resident, I am very sure that this is not happening on a big scale, considering the logistics involved in such a deception.
- Supermancho 3y agoLife is important and longevity is desirable, granted. Life expectancy rank is a negative when talking about future demographics (the pyramid). For most of the world, it's inverted. This includes Japan. https://en.wikipedia.org/wiki/Demographics_of_Japan https://en.wikipedia.org/wiki/Demographics_of_Japan
- toyg 3y ago
- Nifty3929 3y agohttps://lite.cnn.com/2024/03/18/business/japan-boj-negative-interest-rate-ended-intl-hnk/index.html https://lite.cnn.com/2024/03/18/business/japan-boj-negative-...
- stephc_int13 3y agoI have the impression that a lot of what is happening in Japan, is also what will happen elsewhere, about two decades later.
- baerrie 3y agoI had this belief for a bit while living in JP but i eventually realized there are some very key differences culturally that lead to JP’s stagnation. I worked with many college age students and their overwhelming sentiment was a feeling of being crushed by the conservative government and business practices. Entrepreneurship looks very different there.
- alephnerd 3y agoYep! Japan is basically Fordism on steroids. It has it's pros and it's cons, but it's fundamentally a different social structure and contract to North America or Western Europe (which itself have massive differences as well - someone's experiences in DACH are entirely different from the British Isles) The only countries I can think of even safely comparing to Japan might be Taiwan, South Korea, and maybe Singapore.
- SnooSux 3y agoWhat does this mean for the value of the yen in the near future?
- kangda123 3y agoThe moves pricing that in already happened.
- NeutralForest 3y agoIt's always on econ articles that people have to worst takes, good God.
- squaresmile 3y agoHN's a tech forum. It is what it is.
- NeutralForest 3y agoSad but true.
- twojobsoneboss 3y agoNothing worse than tech bros pontificating about macro and economic policy, thinking it’ll give them an edge and FIRE earlier
- blitzar 3y agoIts a similar level as the comments you would see on tech subjects on an econ forum. Those who can, do; those who can't, write "threads" on twitter
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- pjc50 3y agoPeople who can understand the IS-LM model, but won't. Maybe one of these days I should do an easily understandable simulation web toy that people can fiddle with.
- dghlsakjg 3y agoAs an econ major, it was always terrifying working with the non-econ students required to take some of the courses. Some people just didn't grasp the underlying concepts, or understand why understanding was important.
- aamoyg 3y agoSo basically, whoever bought the bonds lost the money, aka, the Japanese government, who loaned itself money at negative interest to buy back its own bonds cancelling out the loss. So there was no growth, and there was stagflation, however, they kept money flowing through the economy via their YCC.
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- Bettye22 3y ago[dead]