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Why Are Japanese Interest Rates Dropping When They Are Trying To Bring Inflation Back?

It is not easy for US investors to process market-moving events in foreign countries and relate them to their own markets. Case in point: Japan.

Everyone knows that Prime Minister Abe is set on causing inflation. His goal is 2% annual inflation. The inflation-phobic current head of the Bank of Japan is resigning early so that Abe can get his preferred choice installed.

The yen has been plunging against all major currencies in association with these events. Given the prospect of inflation, and given that a weakening currency is itself inflationary, why are interest rates dropping? They should be rising, instead. From Bloomberg:

Name Yield 1 Day 1 Month 1 Year Time
JGB 2 Year Yield 0.03% -1 -6 -10 00:59:51
JGB 5 Year Yield 0.14% 0 -3 -21 00:59:53
JGB 10 Year Yield 0.75% -1 -7 -23 00:59:32
JGB 30 Year Yield 1.97% -3 -3  

Here's a longer-term chart link:

To use, click on "Rate Chart for GJGB10".

Please also look at the 2-year simple yield both on a 6 month and 5 year basis. If inflation is coming, why is this yield dropping?

Is Japan going to go to negative short-term interest rates?

It's hard to know what's "real" here, but perhaps Japan's shrinking population implies that it is fading steadily from the roster of the world's leading economies. A weaker currency means that it cannot purchase as much oil and other resources and manufactured goods as before. Declining interest rates may suggest that there will be diminished credit demand.

What is going on in Japans' markets has global market implications. If Japan is unable to inflate, can that prospect help explain gold and silver's poor price action?