News / Asia

    Japan's Central Bank Votes for Negative Interest Rates

    A woman walks past in front of Bank of Japan, Jan. 29, 2016. The Bank of Japan on Friday introduced a negative interest policy for the first time, seeking to shore up a stumbling recovery in the world's third-largest economy.
    A woman walks past in front of Bank of Japan, Jan. 29, 2016. The Bank of Japan on Friday introduced a negative interest policy for the first time, seeking to shore up a stumbling recovery in the world's third-largest economy.

    In a surprise move, the Bank of Japan has decided to introduce an interest rate of minus 0.1 percent.

    The move affects current accounts held by financial institutions at the central bank, which previously offered a miniscule 0.1 percent on deposits.

    “There's a risk of further falls in oil prices, uncertainty over emerging economies, including China and global market instability that could hurt business confidence and delay the eradication of people's deflationary mindset,” BOJ Governor Haruhiko Kuroda told reporters in Tokyo.

    The central bankers, after their 5-4 vote Friday, issued a statement warning of deeper interest rate cuts into negative territory “if judged as necessary.”


    Negative interest rates – something that sounds counterintuitive – means that financial institutions, instead of receiving money for their deposits, must pay to keep their money at the central bank. This is intended to be an incentive for the banks to lend money more freely.


    “It really is a very, very strong signal. It is a penalty for the banks to just lazily give their money to the central bank rather than investing it in the real world,” said Jesper Koll, CEO of WisdomTree Japan, who praised the BOJ move.

    Japan is effectively following the lead of the European Central Bank, which has already introduced negative interest rates after banks there failed to pursue higher returns through enhanced lending.

    The central bank on Friday, by a vote of 8-1, left its asset purchase program unchanged at 80 trillion yen ($673 billion) a year.

    The world's third-largest economy has been grappling with ways to stimulate inflation.

    Consumer spending

    Consumer spending in Japan fell 4.4 percent in December from a year earlier. Government economists had hoped savings from lower oil prices would prompt households to splurge a bit.

    Prime Minister Shinzo Abe for three years with his “Abenomics” policy has been trying to break Japan's deflationary cycle of weak growth and falling prices bedeviling the economy.

    “The dream of Abenomics is about policy coordination. And today what we got is the central bank making it very clear that they will do their part of the bargain,” Koll told VOA.

    Japan has been criticized for failing to be bold enough in restructuring the economy to prompt growth in a country where the population is shrinking and aging.

    “Next we're going to need to see re-ignition, a radical policy break and leadership coming from Prime Minister Abe himself on deregulation, on privatizing and really empowering the demand of the Japanese entrepreneurs and consumers,” said Koll.

    Market reaction

    Friday's decision pushed the yield on Japanese bonds to a record low.

    The yen also fell while the move set off wild gyrations for the Japanese stock indexes with investors apparently wondering whether the BOJ action will be effective.

    The benchmark Nikkei 225 closed up 2.8 percent.

    Other Asian stock markets mostly rose, partly in reaction to the BOJ move as well as being encouraged by China's Premier Li Keqiang reportedly telling International Monetary Fund director Christine Lagarde that Beijing has no intention of boosting exports by devaluing the renminbi.

    The Shanghai Stock Exchange Composite index closed up more than 3 percent for the day Friday, but finished the week down 6 percent.

    The BOJ decision came less than 24 hours after Japan's economy minister, Akira Amari, resigned due to a funding scandal.

    Economic team

    Amari was a core member of the prime minister's economic team, as well as serving as Japan's lead negotiator for the successful formation of the Trans-Pacific Partnership trade bloc.

    Amari's replacement, Nobuteru Ishihara, is a former environment minister and son of an outspoken nationalist, former Tokyo governor Shintaro Ishihara.

    “I want to guide macro-economic policy to spread the benefit of Abenomics through the Japanese economy, including rural areas and small enterprises,” the new economics minister said on Friday.

    The prime minister stressed on Friday that reforms would continue.

    "Together with Minister Ishihara, I'd like to use my full capacity to push through structural reforms and implement our growth strategy," Abe told reporters.

    Steve Herman

    Steve Herman is VOA's Senior Diplomatic Correspondent, based at the State Department.

    You May Like

    Video Democrats Clinton, Kaine Offer 'Very Different Vision' Than Trump

    In a jab at Trump, Clinton says her team wants to 'build bridges, not walls'; Obama Hails Kaine's record; Trump calls Kaine a 'job-killer'

    Turkey Wants Pakistan to Close Down institutions, Businesses Linked to Gulen

    Thousands of Pakistani students are enrolled in Gulen's commercial network of around two dozen institutions operating in Pakistan for over two decades

    AU Passport A Work in Progress

    Who will get the passport and what the benefits are still need to be worked out

    This forum has been closed.
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movementi
    July 22, 2016 11:49 AM
    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.

    Video Poor Residents in Cleveland Not Feeling High Hopes of Republican Convention

    With the Republican Party's National Convention underway in Cleveland, Ohio, delegates and visitors are gathered in the host city's downtown - waiting to hear from the party's presidential candidate, Donald Trump. But a few kilometers from the convention's venue, Cleveland's poorest residents are not convinced Trump or his policies will make a difference in their lives. VOA's Ramon Taylor spoke with some of these residents as well as some of the Republican delegates and filed this report.

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.

    Video With Yosemite as Backdrop, Obama Praises National Parks

    Last month, President Barack Obama and his family visited some of the most beautiful national parks in the U.S. Using the majestic backdrop of a towering waterfall in California's Yosemite National Park, Obama praised the national park system which celebrates its 100th anniversary this year. He talked about the importance of America’s “national treasures” and the need to protect them from climate change and other threats. VOA’s Julie Taboh reports.

    Video Counter-Islamic State Coalition Plots Next Steps

    As momentum shifts against Islamic State in Iraq, discussions are taking place about the next steps for driving the terrorist group from its final strongholds. Secretary of State John Kerry is hosting a counter-IS meeting at the State Department, a day after defense ministers from more than 30 countries reviewed and agreed upon a course of action. VOA Pentagon correspondent Carla Babb reports.

    Video Russia's Participation at Brazil Olympic Games Still In Question

    The International Olympic Committee has delayed a decision on whether to ban all Russian teams from competing in next month's Olympic Games in Brazil over allegations of an elaborate doping scheme. The World Anti-Doping Agency recently released an independent report alleging widespread doping by Russian athletes at the 2014 Winter Olympics in Sochi. So far, only Russian track and field athletes have been barred from the Summer Games in Brazil. VOA's Zlatica Hoke has more.

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.

    Video Millennials Could Determine Who Wins Race to White House

    With only four months to go until Americans elect a new president, one group of voters is getting a lot more attention these days: those ages 18 to 35, a generation known as millennials. It’s a demographic that some analysts say could have the power to decide the 2016 election. But a lot depends on whether they actually turn out to vote. VOA’s Alexa Lamanna reports.

    Special Report

    Adrift The Invisible African Diaspora