30 Years Highest! The World is affected by America's 'Interest Rate Hike', Did the Bank of Japan Move First?
This week, global investors are closely watching Tokyo. The Bank of Japan is set to make a historic decision on December 18-19: whether to raise the policy interest rate by 25 basis points to 0.75%. If realized, this will be the highest interest rate level in Japan since 1995, a full thirty years.
A long-awaited storm is finally coming.
Behind the Interest Rate Hike: A Difficult Confrontation with Politics
Bank of Japan Governor Kazuo Ueda's determination to advance interest rate normalization is sharply colliding with the concerns of the Japanese government. The government led by Prime Minister Sanae Takaichi is trying to stimulate consumption through wage increases, fearing that an interest rate hike at this moment could exacerbate an already weak economy.
Data shows that Japan's economy contracted by 2.3% year-on-year in the third quarter, and real wages have declined for nine consecutive months. Meanwhile, the government's debt burden is staggering, with the debt-to-GDP ratio far exceeding 200%. An interest rate hike would significantly increase the government's debt repayment pressure, thus, this interest rate decision is far from a purely economic issue; it is also a high-level political game.
Kazuo Ueda has been working for the past two years to reverse Japan's decades-long ultra-loose monetary policy. If successful in raising interest rates this time, it will be the second time this year, marking Japan's complete farewell to the 'zero interest rate era'.
The Eye of the Global Storm: America's 'Golden Era' and Digital Games
The Bank of Japan's difficult choice is set against a bizarre global backdrop. The eye of the storm is, precisely, across the Atlantic.
The Trump administration is tirelessly promoting the 'Golden Era' of the American economy, claiming its policies have attracted 'trillions of dollars' in investment. Treasury Secretary Mnuchin even claimed that Trump has driven $20 trillion in new investment, the 'largest in American history'.
However, real data paints a different picture.
