Report
A central bank commitment to not hike interest rates: In Japan, but not in the euro zone
The Bank of Japan has given the Japanese government a commitment to keep short-term and long-term interest rates at zero: the Japanese government can therefore without any difficulty conduct a continuously expansionary fiscal policy; it will not lead to a debt crisis. Even if Japanese savers started to diversify their portfolios internationally and to refuse to hold government securities with a zero yield, the Bank of Japan would buy the required quantity of these securities. The ECB has not given the euro-zone governments a commitment to refrain from raising its interest rates, even though it is likely that they will remain very low for a long time to come. This means that the euro-zone governments must be more cautious than the Japanese government: they must focus on maintaining their fiscal solvency in a situation of higher interest rates.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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