Link;http://www.economist.com/news/business-and-finance/21689694-bank-japan-gingerly-joins-ranks-central-banks-penalising
"On January 29th the Bank of Japan (BoJ) said it would cut its benchmark interest rate below zero, to -0.1%, in an attempt to counteract the effects of falling oil prices and China’s slowdown. The BoJ is following the lead of several central banks in Europe, including the European Central Bank (ECB), which first resorted to negative rates in 2014."
It seems to be a big move for Japan, however,maintaining a sustainable debt level and economy system would be more crucial for now.
I think the article is very interesting, I also posted a similar article earlier with a slightly different angle on this topic. What I thought was particularly interesting about this article was that the “core CPI” was actually inflating, which is something Japan has been in dire need of. Hence, it was clearer in this article that the negative interest rates were possibly necessary to prevent the Japanese banks from sitting on their money. In addition, this article put more emphasis on the fact that oil prices were the necessary cause which forced Japan to lower the interest rates. Hopefully this economic ploy can truly eradicate Japans area of deflation.
ReplyDeleteI agree with Bowersox, however one problem the article points out is that China’s weaker growth and global market gyrations have dented corporate Japan’s willingness to raise base salaries. But if the efforts pointed out by the article tend to yield positive results then as Bowersox concludes this economic ploy can lift the pressure of deflation and the Japanese economy can function positively.
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