Hiroyuki Seki, head of global markets at Mitsubishi UFJ Financial Group, said in an interview on March 6 that he expects the Bank of Japan to end its negative interest rate policy in March and after raising interest rates for the first time since 2007 at its March meeting, it is likely that it will need another rate hike, raising the policy rate to 0 by October at the latest25%。
There are signs that the era of zero interest rates, which has been maintained for nearly two decades, is coming to an end.
For more than two decades, Japan has been printing money like crazy, and interest rates have remained ultra-low.
The direct result of the frenzied printing of money is to raise prices, because the amount of money increases, and the amount of goods and services does not increase accordingly, which leads to the price of goods. In addition, printing money can also lead to the depreciation of the currency, because the more money is circulating in the market, the fewer goods and services can be purchased per unit of currency. In this case, inflation will increase because prices are moving faster than wages and incomes.
Another purpose of the money printing frenzy is to avoid falling into vicious deflation. Vicious deflation is an economic phenomenon that manifests itself in a sustained decline in prices, leading to a slowdown in economic activity, a rise in unemployment, a decrease in investment and consumption, and a recession in the economy. In order to avoid this, Japan has adopted a strategy of frenzied money printing, hoping to stimulate economic activity by increasing the amount of money and prevent further prices.
However, there are risks associated with this practice, because if money is printed faster than the economy actually needs, it can lead to excessive prices, which can trigger inflation.
As we all know, Japanese bonds are known as one of the three major bubbles in the world.
Japan's total national debt is 1,207 trillion yen, or 266% of GDP, which is far more than a normal country's economy. The United States is 1312%, 108% in the UK, 100% in China, 266% in Japan, what is the concept? While the debt is so large, Japan has been running deficits for many years.
As the scale of borrowing expanded, the annual interest paid became astronomical. Japan's aging population is a serious problem, there are few people to work, and there are many benefits, so it cannot be satisfied by taxes, and it has to issue debts. As a result, Japan has relied on its strong credit base, and the more it owes its national debt, the more it owes, and the pile is getting bigger and bigger. After this operation, sooner or later there will be a crash.
However, Japan's debt structure is a bit special, more than 93% of the national debt is held by local enterprises and people, in other words, Japan's ** is basically a yen debt borrowed from its own people.
For the future of Japan, the prospect of interest rate hikes is uncertain.
On the one hand, if Japan's economy continues to improve and inflationary pressures continue to increase, then the Bank of Japan is likely to continue raising interest rates. On the other hand, if the global economic environment deteriorates, such as a recession in the U.S., then the Bank of Japan may reconsider its interest rate hike policy. In addition, the BOJ will need to take into account the impact of interest rate hikes on domestic businesses and consumers, as well as the impact on international capital flows. As a result, the outlook for interest rate hikes in Japan is fraught with uncertainty.
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