Both Japan and Australia are developed countries. What cause the disparity of interest rate of as low as 0.1% in Japan but as high as 4.5% in Australia? - Forex Questions and Answers - FXAnswer

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Both Japan and Australia are developed countries. What cause the disparity of interest rate of as low as 0.1% in Japan but as high as 4.5% in Australia?

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- Kingpin
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1 year ago

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0 Votes Japan’s economy faltered since the great recession of the 1990s and has stagnated since. Japan entered into a financial crisis far worse than other developed nations. In end of 2002 key policy change was made in order to spur recovery by adopting the almost zero-interest-rate policy for nearly six years under the central bank's "quantitative easing" policy in an attempt to boost incentive for consumption and investment and boost lending and growth. Persistent and prolonged deflation in Japan has been undermining recovery and in its continued effort to fight falling prices, Japan's central bank has kept interest rates low which currently stands at 0.1%. Its a different story for Australia. Unlike Japan, Australia has experienced positive reforms that have shaped up its economy over the last two decades. Aside from its strong banking system and robust monetary and fiscal policy, Australia's economy is helped by the country's abundance of agricultural and mineral resources, rising investment by mining companies, surge in commodity prices, improving labor market and strong domestic demand. Australia is currently riding the commodity boom and this rapid economic recovery has resulted in increased inflation pressures. In the strength of its economic recovery, Australia's central bank has raised the cost of borrowing six times in eight months. In May 2010, interest rate was raised to 4.5%—up from 3% in October last year, a move which could help contain rising inflation. by fxpie 1 year ago by fxpie 1 year ago
0 Votes Japan's economy was in long-term recession since the early 1990s; rate dropped from 6% to slightly above 1%. The government introduced ZERO interest in 2001 to try to revive economy; to make it cheaper for consumers and companies to borrow money for spending, and less attractive for them to save. Then The Bank of Japan has abandoned the country's zero interest rate policy after more than five years. In July 2006 Rates have been set at 0.25% as the economy has started to recover; and up and down adjustment up until now 0.1%. On the other hand, Australia key problem is to fight inflation. Australia is world's largest raw materials exporter already experiencing significant capacity constraints in terms of labor and infrastructure and coupling with continue high demand of natural resources from China, inflation has no where to go but up. Therefore interest rate remains high despite the slowing American economy. by Warren 1 year ago by Warren 1 year ago
0 Votes Japan and Australia are both developed countries but disparity in interest rate comes from the fact that there are countries that attract and that does not attract investors due to their monetary policy which Japan is one of them being an export oriented economy.If Japan should have interest rate as high as in Australia the Yen will appreciate and Japanese export companies will lose competitive advantage.On the other hand appreciation of Australian dollar usually help the sales of Gold. by Harold 1 year ago by Harold 1 year ago

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Japan’s economy faltered since the great recession of the 1990s and has stagnated since. Japan entered into a financial crisis far worse than other developed nations. In end of 2002 key policy change was made in order to spur recovery by adopting the almost zero-interest-rate policy for nearly six years under the central bank's "quantitative easing" policy in an attempt to boost incentive for consumption and investment and boost lending and growth.

Persistent and prolonged deflation in Japan has been undermining recovery and in its continued effort to fight falling prices, Japan's central bank has kept interest rates low which currently stands at 0.1%.

Its a different story for Australia. Unlike Japan, Australia has experienced positive reforms that have shaped up its economy over the last two decades. Aside from its strong banking system and robust monetary and fiscal policy, Australia's economy is helped by the country's abundance of agricultural and mineral resources, rising investment by mining companies, surge in commodity prices, improving labor market and strong domestic demand. Australia is currently riding the commodity boom and this rapid economic recovery has resulted in increased inflation pressures.

In the strength of its economic recovery, Australia's central bank has raised the cost of borrowing six times in eight months. In May 2010, interest rate was raised to 4.5%—up from 3% in October last year, a move which could help contain rising inflation.

fxpie

1 year ago

Votes

Japan's economy was in long-term recession since the early 1990s; rate dropped from 6% to slightly above 1%. The government introduced ZERO interest in 2001 to try to revive economy; to make it cheaper for consumers and companies to borrow money for spending, and less attractive for them to save. Then The Bank of Japan has abandoned the country's zero interest rate policy after more than five years. In July 2006 Rates have been set at 0.25% as the economy has started to recover; and up and down adjustment up until now 0.1%.
On the other hand, Australia key problem is to fight inflation. Australia is world's largest raw materials exporter already experiencing significant capacity constraints in terms of labor and infrastructure and coupling with continue high demand of natural resources from China, inflation has no where to go but up. Therefore interest rate remains high despite the slowing American economy.

Warren

1 year ago

Votes

Japan and Australia are both developed countries but disparity in interest rate comes from the fact that there are countries that attract and that does not attract investors due to their monetary policy which Japan is one of them being an export oriented economy.If Japan should have interest rate as high as in Australia the Yen will appreciate and Japanese export companies will lose competitive advantage.On the other hand appreciation of Australian dollar usually help the sales of Gold.

Harold

1 year ago

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