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The story
As the US Federal Reserve raises interest rates for the first time in roughly three years, speculation is growing that the Bank of Japan will also move to hike rates further. Paul Sheard, former vice chairman of S&P Global, argued that the BOJ needs to raise its policy rate to around 1.5–2%, and suggested that in the long run the yen could strengthen to the 130s or even 120s against the dollar. On 5ch, this proposal sparked lively debate over the relationship between interest rate differentials and exchange rates, the clash between expansionary and austerity fiscal policy, and how inflation affects different generations.
As the US Federal Reserve (the Fed) moves to raise interest rates for the first time in about three years, expectations are growing that the Bank of Japan will also carry out an additional rate hike this week. A prominent American economist stated that the BOJ needs to raise its policy rate to somewhere around 1.5% to 2%.
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Paul Sheard, former Vice Chairman of S&P Global
Source: news.yahoo.co.jp / Original article here
What people said
Japan should get its rate up to neutral before that happens —
that's the only way the rate gap actually starts closing.
Looks like it could happen sometime next year though.
With the midterms on November 3rd making Trump a lame duck, won't the pressure for rate cuts ease up?
And what about inflation?
so hiking rates won't do a damn thing.
Houses won't sell and we're headed straight into a recession.
Meanwhile the government's interest payments wreck the budget.
Sounds like a realtor sweating bullets lol
>This is cost-push inflation,
>so hiking rates won't do a damn thing.
>Houses won't sell and we're headed straight into a recession.
>Meanwhile the government's interest payments wreck the budget.
Yeah, clearly a realtor panicking, but it's obvious this is just copy-pasted straight from generative AI lol.
I get answers from "Caude" (sic — presumably means Claude) that match this word-for-word all the time.
but it looks like the US is finally moving to put an end to it.
Exchange rates aren't decided by interest rates alone.
Japan's population is shrinking and will keep aging with a falling birthrate for the long haul — there's no way the yen strengthens under those conditions.
That whole "responsible expansionary fiscal policy" leading to "growth" is a total lie.
Apparently the top priority sector is AI,
so our tax money ends up funding American Big Tech instead.
A Big Mac costs ¥600 in Japan versus the equivalent of ¥800 in the US
Aging populations and low birthrates aren't some exclusive Japanese problem.
Especially on the birthrate front, Japan's actually one of the better-off countries in East Asia these days.
True, Germany and Italy have a similar average age to Japan and they're seeing solid economic growth.
Japan's the only one in steady decline.
https://imgur.com/MrcH9mf.jpeg
If I knew what sector was going to grow, I wouldn't be a politician or a bureaucrat — I'd be running my own business with that knowledge.
Could you have predicted stickers would become a huge trend?
Exactly — that's precisely why the state has currency-issuing power, letting it invest in all kinds of areas companies simply can't replicate.
And since infrastructure upkeep isn't being done properly, flood damage keeps rising, which just drives up reconstruction costs even more.
You still haven't reached the point of realizing that currency-issuing power itself is the problem.
Still got a long way to go.
Issuing currency isn't the problem in itself — issuing it improperly is the problem.
What matters is getting money into citizens' hands, not the government spending it.
Rich people prefer inflation lol,
since it drives up the value of their assets.
You don't actually think rich people keep their wealth in cash, do you? lol
Sorry, I meant everyone except the rich.
Inflation is actually better for young people.
Just look at now, in this inflationary period —
the job-openings-to-applicants ratio is at an all-time high,
and starting salaries are at an all-time high too.
That's exactly why the Takaichi administration has such high approval among young people.
Young people get old eventually too, you know.
And on top of that, those same young people are getting married even less than they did back in the deflation era lol
True enough.
Inflation means my savings are effectively losing a few percent of their real value every year,
so it does narrow the gap between young and old.
Background and Key Points of the Debate
Speculation about a BOJ rate hike tends to be discussed alongside expectations of yen appreciation from a narrowing US-Japan rate gap, but as commenters in the thread pointed out, exchange rates aren’t determined by rate differentials alone — structural factors like the trade balance and demographics matter too. The “carry trade” refers to borrowing low-interest yen to invest in overseas assets, and it’s often cited as a key reason the BOJ kept rates pinned down for so long. The fight between expansionary and austerity fiscal policy has raged for decades; it’s true Japan’s government debt-to-GDP ratio is among the highest of any major economy, but economists themselves are split on whether that’s actually a problem, so it’s not a topic that reduces neatly to right and wrong.
*This article is compiled as an excerpt and summary of the 5ch (News Speed+) thread “Prominent US economist says Japan needs to raise rates to 1.5–2%, “In the long run, levels of ¥130 or ¥120 to the dollar”.”
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