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Tuesday, March 04, 2003

Japan: Long Term Yields Continue to Fall

Yes, deflation in Japan is definitely settling down for the long haul. Ten year yields of government bonds hit a historic low of 0.74 per cent today indicating that investors have no belief in recovery any time soon. One passing thought, all the commentaries on Japan make the comparison with 1930s style dramatic deflation. But what we are seeing in Japan, and what we may see elsewhere, is more creeping deflation, hovering in the 1% to 2% range almost indefinately. This seems to me to be knew as a historical phenomenon, and worthy of comment in its own right (an omission which, of course, I will try to correct on another occasion).

Masaru Hayami took the governor's chair at the Bank of Japan's policy board meeting for the final time on Tuesday as government bond yields plunged to record depths, confirming the market does not see an imminent end to deflation.The yield on the 10-year government bond hit a historical low of 0.74 per cent on Tuesday signalling that investors do not expect price rises to erode the value of bond income any time soon.
Source: Financial Times

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