BUSINESS INSIDE / Rising interest rates are a good thing.

(From The Yomiuri Shimbun/Daily Yomiuri)

BUSINESS INSIDE / Rising interest rates are a good thing

Richard A. Werner Special to The Daily Yomiuri

Yomiuri

Japan's nominal gross domestic product grew by 2.6 percent in the first quarter this year, compared to the same quarter in the previous year. This was the highest year-on-year growth rate in nominal GDP since 1997. But instead of rejoicing about this news, many investors have been worried by it: If Japan's recession and deflation are about to end, then interest rates should rise.

The Bank of Japan may soon have to end its policy of almost zero short-term interest rates. Such fears coincide with the rise in U.S. interest rates. And all commentators agree: If interest rates rise, this will be bad for growth. Japanese corporations and banks have benefited for so long from ultralow interest rates, the argument goes, they will now be hurt by higher costs of borrowing. Thus, is it time to get bearish on the Japanese economy and its equity market?

The logic …