To protect the yen, Japan keeps buying US bonds and keeping yields low.
February 10, 2004: 9:45 AM EST
Who doesn't love low interest rates?
Great for home buyers, great for companies that borrow money to expand their businesses, and great for taxpayers because they help keep interest payments on the giant national debt lower than they would be otherwise.
Answering my own question, I'd have to say that people who depend on interest payments as a source of income don't like low rates.
But if you are a low rate lover, you have to thank the Japanese government for playing its part to keep rates low.
They bought more than $200 billion worth of U.S. government bonds last year, and appear to have bought more than $60 billion(!) in January of this year alone. That's because they have been buying dollars like crazy in global currency markets to keep it from falling against the yen -- because a strong yen hurts their exporters.
Today is the first day of the Treasury's $56 billion quarterly refunding, basically a big bond sale. The Japanese are expected to be in again as big buyers of U.S. bonds, which in fact is U.S. debt.
So if you're getting to refinance your mortgage and you're surprised to see how nice and low the rate is, think of the Japanese who are helping to keep that rate so low. And hope that they keep buying U.S. debt.
If their appetite should change, something most pundits aren't looking for anytime soon, it could have quite an impact on domestic interest rates.
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