By MortazaviBlog on Jul 25, 2006
Interest rates seem to be rising on a global scale.
Yuka Hayashi of The Wall Street Journal reports on the fear of rising inflation and interest rates in Japan.
For the past decade Japan had suffered from falling prices and near zero interest rates which had been held by many economists to be the cause of its economic vows.
"As labor costs rise, some companies are beginning to pass on some of the burden to consumers by raising prices. That's most noticeable in industries that depend on part-time and temporary workers, such as food service and retail," writes Hayashi.
Because Japan holds large financial assets, "[h]igher Japanese rates could cut off an important source of financing for the world economy. Extremely low Japanese rates encouraged wealthy Japanese investors to pour money into overseas assets. Meanwhile, speculative investors around the world borrowed money cheaply in Japan and invested it elsewhere."