Long-term interest rates are on an upward trend both in Japan and the United States. The yield on the 10-year Japanese government bond has recently been in the 1.5 percent range, while market rates on 10-year U.S. government bonds have been hovering at around 5 percent — the same as at the beginning of 2001 — despite the 11 cuts the Federal Reserve Board has made to short-term interest rates over the past year.
There are various factors behind this trend, but long-term interest rates are obviously not rising in anticipation of a recovery in the two economies. For its part, the Bank of Japan has already explored most of the monetary measures available to it.
In the U.S., President George W. Bush clearly said at the beginning of his State of the Union address, "Our nation is at war, our economy is in recession." FRB Chairman Allan Greenspan has also not changed his downward bias over short-term interest rate policy. Participants in the Group of Seven meeting over the weekend emphasized bright signs in the global economy, but the G7 statement should be taken as an indication of the expectations of the world's financial authorities. Downward risk has not been ruled out.