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Fed's Rate Cuts Threaten to Chill Japanese Investment

Wall Street Journal Original article ›

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As the Fed cuts rates again moving to 0.5% on December 16, 2008, as expected , it brings US interest rates closer to Bank of Japan's rate of 0.3%. Higher rates have led Japan's giant insurance companies and pension fundsinto Us Treasury's, with Japan holding $ 573 billion in US Treasurys in September according to the USA Treasury Department. On 4 week securites the US has already sold Treasurys last week at a yield of zero which attracted money as a safe haven.On December 12, the dollar settled at 91.04 yen, down 18.4% this year. The concern is that a weaker dollar could result from a move away from dollar assets and the stronger yen would further weaken the prospects for Japanese exporters.


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