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.”

    Incentive

    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

    A veteran journalist, Steve Herman is VOA's Southeast Asia Bureau Chief and Correspondent, based in Bangkok.

    You May Like

    US-Russia Tensions Complicate Syria War

    With a shared enemy and opposing allies, Russia and the US are working to avoid confrontation

    Video Re-opening Old Wounds in Beirut's Bullet-riddled Yellow House

    Built in neo-Ottoman style in 1920s, it is set to be re-opened in Sept. as ‘memory museum’ - bullet-riddled walls and bunkered positions overlooking city’s notorious ‘Green Line’ maintained for posterity

    Cambodian-Americans Lobby for Human Rights Resolution

    Resolution condemns all forms of political violence in Cambodia, urges Cambodian government to end human rights violations, calls for respect of press freedom

    This forum has been closed.
    Comments
         
    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.
    Brexit Vote Plunges Global Markets Into Uncharted Territoryi
    X
    June 24, 2016 9:38 PM
    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Brexit Vote Plunges Global Markets Into Uncharted Territory

    British voters plunged global markets into unknown territory after they voted Thursday to leave the European Union. The results of the Brexit vote, the term coined to describe the referendum, caught many off guard. Analysts say the resulting volatility could last for weeks, perhaps longer. Mil Arcega reports.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Experts: Very Few Killed in US Gun Violence Are Victims of Mass Shootings

    The deadly shooting at a Florida nightclub has reignited the debate in the U.S. over gun control. Although Congress doesn't provide government health agencies funds to study gun violence, public health experts say private research has helped them learn some things about the issue. VOA's Carol Pearson reports.
    Video

    Video Trump Unleashes Broadside Against Clinton to Try to Ease GOP Doubts

    Recent public opinion polls show Republican Donald Trump slipping behind Democrat Hillary Clinton in the presidential election matchup for November. Trump trails her both in fundraising and campaign organization, but he's intensifying his attacks on the former secretary of state. VOA National Correspondent Jim Malone reports.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapide’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.
    Video

    Video Florida Gets $1 Million in Emergency Government Funding for Orlando

    The U.S. government has granted $1 million in emergency funding to the state of Florida to cover the costs linked to the June 12 massacre in Orlando. U.S. Attorney General Loretta Lynch announced the grant Tuesday in Orlando, where she met with survivors of the shooting attack that killed 49 people. Zlatica Hoke reports.
    Video

    Video How to Print Impossible Shapes with Metal

    3-D printing with metals is rapidly becoming more advanced. As printers become more affordable, the industry is partnering with universities to refine processes for manufacturing previously impossible things. A new 3-D printing lab aims to bring the new technology closer to everyday use. VOA's George Putic reports.
    Video

    Video Big Somali Community in Minnesota Observes Muslim Religious Feast

    Ramadan is widely observed in the north central US state of Minnesota, which a large Muslim community calls home. VOA Somali service reporter Mohmud Masadde files this report from Minneapolis, the state's biggest city.

    Special Report

    Adrift The Invisible African Diaspora