🚨 Bond and Currency Crisis in Japan Is About to Worsen..
Japan’s 2-year government bond yield is at its highest level since 1991 at 1.71%, while the dollar/yen pair resumes its climb, approaching the 160 level.
These pressures are driven by the continued rise in inflation rates. Producer prices rose 7.2% year-on-year in July—the highest rate in about 3.5 years—as core inflation in Tokyo accelerated for the third consecutive month.
Two factors are fueling this inflation: first, the closure of the Strait of Hormuz, which keeps oil prices high; and second, the weakness of the yen, which increases the cost of all Japanese imports.
This situation is pushing the Bank of Japan toward raising interest rates at a time that could start as early as September, with further increases likely on the horizon.
However, raising interest rates creates another problem: Japan already has one of the highest public debt-to-GDP ratios in the world, so each rate hike sharply increases the cost of servicing this debt.
There is no easy way out of this crisis through economic growth; Japan’s labor force is shrinking alongside falling birth rates, limiting the country’s long-term growth prospects just as borrowing costs continue to rise.
#news #Japan
Japan’s 2-year government bond yield is at its highest level since 1991 at 1.71%, while the dollar/yen pair resumes its climb, approaching the 160 level.
These pressures are driven by the continued rise in inflation rates. Producer prices rose 7.2% year-on-year in July—the highest rate in about 3.5 years—as core inflation in Tokyo accelerated for the third consecutive month.
Two factors are fueling this inflation: first, the closure of the Strait of Hormuz, which keeps oil prices high; and second, the weakness of the yen, which increases the cost of all Japanese imports.
This situation is pushing the Bank of Japan toward raising interest rates at a time that could start as early as September, with further increases likely on the horizon.
However, raising interest rates creates another problem: Japan already has one of the highest public debt-to-GDP ratios in the world, so each rate hike sharply increases the cost of servicing this debt.
There is no easy way out of this crisis through economic growth; Japan’s labor force is shrinking alongside falling birth rates, limiting the country’s long-term growth prospects just as borrowing costs continue to rise.
#news #Japan
