Bank of Japan shocks with move to negative interest rates

29th January 2016

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The Bank of Japan has made the shock move into negative interest rates territory in a bid to get its banks lending.

 

The benchmark rate is now -0.1% which means the central bank will charge commercial banks for some deposits as of 16 February.

 

The head of the central bank Haruhiko Kuroda warned that rates could be pushed lower still ‘if judged as necessary’ as the country struggles with a weakening economy.

 

In its economic outlook, the BoJ said the economy was recovering ‘moderately’ but uncertainties remain over emerging markets and China, which could hinder Japan.

 

‘Global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty over future developments in emerging and commodity-exporting economies, particularly the Chinese economy,’ said the BoJ in its outlook.

 

‘For these reasons, there is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected.’

 

The bank’s policy committee was not unanimously agreed on negative rates, with five members voting in favour and four against.

 

 

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