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Japan is an outlier in the global rush to end the era of cheap financing

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Central bankers in Jakarta, Hong Kong and Manila had a busy week, hiking interest rates to keep pace with the US Federal Reserve. New Delhi telegraphed more tightening moves to come. But officials in Tokyo? Crickets.

There is a positive spin to put on Fed Chairman Jerome Powell hiking rates a third time in his short 237-day tenure. It’s a sign of confidence that the world’s biggest economy is vibrant enough to thrive without post-2008 emergency measures. Also, there’s an adult in the room as Donald Trump goes off the rails, fiscal policy-wise.

But that is cold comfort for central bankers Perry Warjiyo of Indonesia and Nestor Espenilla of the Philippines. Both tightened on Thursday - by 25 basis points and 50 basis points, respectively - to keep pace with the Fed. A day earlier, the Fed put its benchmark up to the 2 per cent to 2.25 per cent range.

Hong Kong, of course, raised its base rate accordingly to maintain the city’s currency peg to the dollar. The People’s Bank of China, meantime, faces quite a balancing act. As the Fed yanks away the punchbowl, Beijing must offset the effects to support growth. That challenge collides directly with Trump’s escalating trade war. It collides, too,........

© South China Morning Post