Problems in the global market, stable inflation and weak economic data seem to offer all the ingredients for a central bank to postpone the rise in interest rates. But not for the Bank of Japan. While the rhetoric of other central bank governors of major stained cautious about changes in the global market as a result of the crisis in the subprime mortgage market, Toshihiko Fukui, Bank of Japan maintained that the policy should harden.

The market uncertainty was enough to keep rates unchanged in August at a level of 0.5 percent, but quickly Fukui stressed its determination to increase interest rates in order to avoid what he called the painful market adjustments.

"Local economic conditions are in line with forecasts of the BOJ, so once you return calm to financial markets, the bank will go ahead and raise rates," said Hideo Kumano, chief economist at Dai-research institute ichi Life.

"The BOJ seems to stick to its position to raise rates once every six months," which means that the next increase could take place in October followed by another early next year, "he said.

Many economists expect a rate increase to 0.75 percent by the end of this year and 1.0 percent by the end of the term of Fukui in March.

Why is the Bank of Japan so determined to raise rates?

One reason is the memories of the economic bubble Japan experienced in the late 1980s and beginning of 1990 that led to a drop in nearly a decade of deflation.

The BOJ said repeatedly that need to take preventive action at the first sign of overheating in the economy.

Officials are concerned that the possibility of keeping rates at a low level for too long will exacerbate the economic changes, even if politicians fear that rising rates will lead the economy back into recession, what was charged BOJ in 2000.

So far, the economy is showing further signs of slowdown of overheating.

Growth showed a weak 0.1 percent in the April-June period, with the warm personal spending is expected to improve in the next quarter.

Weak capital spending statistics that were released on Monday on expectations that increased numbers of growth in April-June could be revised downwards over the next week.

Consumer prices fell by structural sixth consecutive month.

But the Bank of Japan is trying to look ahead and some statistics indicate that there will be inflation.

While consumer prices fell for a few months, wholesale prices are rising and could fuel consumer prices. Were 2.1 percent higher in July over the same period last year.

Supporting this scenario, some food prices are increasing at a sign that companies are finally being able to pass on higher costs to consumers.

The unemployment rate is at least 9 years of 3.6 percent, which could eventually generate more momentum for wage growth and consumption, economists say.

(Via: Reuters )

For if, in Japan there were also a few years ago called "housing bubble" by Spain's happening right now. Every time I talk about the housing situation in Spain with Ayumi's family always tell me exactly like what happened in Japan. People bought houses and sold for a lot more than it had cost him in a few years. The interest rates rose to 8% until all callus sharply. In fact, Ayumi's parents sold a house that had then by double what it had cost them.
Now in Japan the situation is very different when you go to sell a second hand floor, usually sold cheaper than you had taken (see it as a used car), unless it is in an area has grown a lot and has become very popular.

Reading the above article, it appears that Japan is afraid that this will happen again seeing the issue as is the issue in the U.S. and Spain, so it seems that they will start raising interest rates as a preventive measure, so you know: - apartments buy now before interest rates go up!.

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