How Shifting Policies in Japan and China May Affect US Interest Rates
Major policy shifts are underway in Asia that could have ripple effects on US interest rates over the next few years. In Japan, the central bank is unwinding its yield curve control policies that had previously sent billions overseas chasing returns. As this cheap money flows back home, Japanese investors may sell US assets like Treasuries, pushing up yields. Meanwhile, China faces slowing growth and may need to sell some US bonds to defend its currency. While reduced Asian imports could slightly ease US inflation, experts believe upward pressure on rates from capital flows is a larger factor. On balance, developments in Asia are poised to be a moderate headwind for US interest rates.
