On 23 Apr 2014
It's not the fed,
The reason behind it is the same reason for low interest rates in the United States. Competition for return on investment, not the fed.
Have you ever done a free weight bench press with a spotter ?
If the weight is too much all it takes is the slightest bit of help from the spotter to lift it. (btw, I'm not anything close to a bodybuilder, but I've done it on a few occasions).
In this metaphor, the fed is the spotter. It's not just the amount of bonds they buy (QE) that affect long term rates. It's knowing that they are there. As you say, the psychological effect of that.
There is the perception that they are there to do whatever it takes. And meanwhile, as long as it's not causing too much infation, they can do whatever it takes.
But a time will come, when everyone knows that the fed is not there, and that if the fed lowers rates then it exacerbates inflation too much. At that time the trend may be down in bonds, and it might be in equities too. Once those expectations turn around, look out.
Anyone who makes an absurd statement such as "at most the fed impact is .6%" doesn't really understand that psychological factor. The global effect of so many countries being in the same boat(monetary ease with impunity aka liquidity trap), magnifies the effect as well. It's not like we just go to another country to buy bonds that are a higher yield for the same risk.
Back to Japan. This is a subtle distinction. The central bank participates in bidding the price of ST debt up (rates down), as well as longer term rates (only in these weird days of QE).
But if you want to view it your way, it still helps to explain why rates can be so low in Japan. The deflationary environment is what causes people to except such low rates, which is turn, puts a damper on the downward pressure on RE prices, because long term debt is cheaper, and this is a way of lowering the cost of buying RE without the nominal price dropping.
It's essentially an alternate expression of the deflation that is occurring in capital assets. It's differnt than what's happening here, although we still have some of that deleveraging deflationary effect, it's nothing like the trends in Japan.