Finance Minister Masajuro Shiokawa and Bank of Japan Gov. Toshihiko Fukui have agreed not to worry over the recent rise in long-term interest rates.
Shiokawa on Wednesday told reporters that the two feel the state of the economy remains stable.
The positive comments came as concerns are growing that the interest-rate hike could end up hurting the country’s fragile economy.
The yield on the benchmark 10-year government bond briefly touched 1.4 percent Friday, compared with a record low of 0.43 percent last month.
At Shiokawa’s request, the two met earlier in the day for an hour to discuss the issue, he said.
“What we agreed on was we don’t have to worry very much about a small rise in long-term interest rates when the real economy is somewhat good in terms of stocks, the currency and corporate earnings,” Shiokawa said. “But we also agreed that we have to cautiously monitor how much the interest rates go up.”
Asked if the Finance Ministry will request a specific policy at a BOJ policy meeting scheduled for next week, Shiokawa said it will not.
The sharp rise in long-term interest rates has partly stemmed from a transfer of investor money from the bond market to the stock market.
The Nikkei stock average of 225 issues briefly rallied above the psychological barrier of 10,000 Tuesday for the first time since last August. On Wednesday, the average rallied for a third consecutive day to finish at 9,990.95, its highest close since Aug. 26, 2002.
Mizuho raises rate
Mizuho Corporate Bank will raise its long-term prime lending rate 0.35 percentage point to 1.6 percent, effective Thursday, reflecting the recent surge in long-term interest rates on falls in government bond prices.
The increase in the long-term prime rate, charged on loans of one year or longer to the bank’s most creditworthy corporate clients, is the first by Mizuho in seven months, and is expected to be followed by other lenders, including Shinsei Bank and Aozora Bank.
The bank sets the long-term prime rate 0.9 percentage point higher than the coupon on five-year bank debentures.
Mizuho Corporate Bank, a unit of Mizuho Financial Group Inc., is making the move as yields on bonds and its own debentures surge.
Analysts said Wednesday the hike in the long-term prime rate which raises businesses’ fundraising costs, could dampen their plans for capital investment plans. and thus hurt the economy on the whole.
On the other hand, it could provide a boost to banks, which have been unable to charge interest rates high enough to make up for all of their souring loans.
After the new rate is put in place, the short-term prime rate charged on loans of less than one year, currently at 1.375 percent per year, will be lower than the long-term prime rate for the first time in three months.