New Delhi, May 26 -- Dear reader,

Last week, I wrote that our financial markets would ignore Moody's US downgrades. That hypothesis was validated by the markets. Our headline indices brushed aside all worries and remained stable. Our markets weathered a new storm that emanated from Japanese shores. The Japanese prime minister, in a political debate, turned down requests for lowering corporate taxes, saying the state of the Japanese economy was weaker than the Greek economy. This triggered a panic reaction in global (particularly Asian) markets.

In order for Japan to attract overseas capital or even bring back its own currency invested abroad, the Bank of Japan (BoJ) would almost certainly need to raise interest rates. This would force g...