The 3 main reasons why the Japanese government is rushing to raise its interest rates right now:
(1) By raising government bond yields, the government aims to steer corporations and citizens away from foreign investments and toward Japanese government bonds. This prevents government bond auctions from failing and also acts as a brake on yen depreciation.
(2) To ensure that the option to cut interest rates remains available in the event of an economic downturn.
(3) To combat inflation. If inflation is left unchecked, it will fuel public dissatisfaction with the government, putting it at a disadvantage in the next election.
4 Reasons why the survival of the Japanese government comes at the expense of the private sector:
(1) Financial institutions that already hold large amounts of government bonds will almost inevitably go bankrupt due to massive unrealized losses resulting from rising interest rates.
(2) Bankruptcies among private companies due to increased interest payments.
(3) Sluggish private investment due to reduced borrowing and lending resulting from rising interest rates.
(4) An increase in personal bankruptcies due to rising interest rates on mortgages and credit cards.
