Thursday, 10 February 2011

Bank of Japan Basic Discount Rate

Bank of Japan Data link

Given the homogeneous nature of Japanese interest rates this has been the easiest data set to create so far. As with the other central banks I've looked at the BofJ has more than one key rate, but the one I've charted is considered the main one; it's the rate at which the central bank will lend to the major commercial banks. The other important figure is known as the "uncollateralised overnight call rate", which is simply the interbank lending rate. There's a useful article about this process here.

The idea was to create a graph that logged Japanese base rate decisions just before the real estate bubble burst in 1990, as you can see although rates were low in the lead up to the crash they were still within normal parameters (just). It's often overlooked but they then tightened monetary policy for about 3-4 years, before raising the white flag and handing the economy over to the bankers and other rentiers. Perhaps I should send a copy of this graph to every MP in the land as well as Mervyn King, despite 17 years' worth of ZIRP (zero interest rate policy), they're suffered sluggish growth, deflation and absurdly high levels of government debt, if this policy didn't work in Japan what's makes them think it's going to work here?

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