Yen interest rates expected to rise

More signs that the Bank of Japan could raise rates over the coming months came on Monday when one of the bank’s board members, Atsushi Mizuno, said that monetary policy should monitor the risk of overheating in asset prices (ie, not just consumer price inflation).

Japan’s bubble burst at the beginning of the 1990s after a surge on both property and equity prices, leading to more than a decade of deflation and stagnation.

Japan’s broadbased economic recovery was confirmed on Monday by figures showing real GDP growth of 1.3% Q/Q in the fourth quarter, just below the 1.4% initial reading. This was the fourth quarter of consecutive growth.

The Bank of Japan has held interest rates at close to zero for five years, prompting billions of dollars of “carry trades”, whereby companies borrow in cheap yen to invest in higher-yielding dollar or euro-denominated assets.