Japan began to implement negative interest rate

by Zeyang

On January 29th, the bank of Japan on the monetary policy meeting, in a ratio of 5 votes for 4 against decided to implement a negative interest rate policy.Reasons for the crude oil prices and disturbing impact on China's economy, the global economic outlook worries appear to heat up, for the Japanese domestic economic sentiment and price the risk of a negative impact strength.Private Banks in part of the deposit at the bank of Japan will start from February - 0.1% interest rate shall apply.The bank now for financial institutions in the current account system of three layers of interest rates: Positive interest rates, interest rates at zero and negative interest rates.Among them, 0.1% of the current account balance is interest rates applicable to financial institutions;Zero interest rates apply to financial institutions in the central bank reserve requirements;Not included in the above reserves would apply within negative interest rate of 0.1%. They also pledged to increase each year 80 trillion yen monetary base.At the same time, also announced the implementation schedule of 2% inflation target, is expected to reach the goal before and after in the first half of fiscal 2017.After the bank of Japan policy announced, once the dollar against the yen jumped 2.2%, its biggest gain since October 2014.By 29 January, the dollar against the yen at 120.76, or 1.67%.

In order to show a 2% inflation target determination, Japan's central bank governor, is undergoing a "gamble".He bet is Japan's economy：；it is every Japanese life.This is subversive deposits for the practice of the basic principle of economic interest, the equivalent of a dose effect is difficult to predict the "strong medicine".The positive effect of negative interest rates is to promote investment and consumption, causes the yen;Negative effect is a blow to a bank, may accelerate confusion.

resources:
Gareth Allan. Negative Rate Fail to Spur Japan Bank Loans in First Month". Bloomberg. Jan, 2016.