Bank of Japan Stuns Global Markets by Announcing Negative Interest Rates

The Bank of Japan narrowly approved a three-tiered system on rates including one in the negative territory, -0.1 percent for “excess reserves parked at the bank by financial institutions,” reports David Scutt for Business Insider Australia.The move essentially encourages lending and charges banks for storing cash. The central bank also announced further rate cuts may be issued as needed. “The BOJ cited recent volatility in financial markets, particularly towards the outlook for the Chinese economy, as one of the catalysts behind its decision,” reports Scutt, adding that the move is expected to increase the relative value of the US dollar and the Chinese renminbi. “The BOJ said the move was aimed at forestalling the risk of global financial turbulence that could hurt business confidence and revive the ‘deflationary mindset’ it has been striving to wipe out with aggressive money printing,” notes a report in the Japan Times that combines wire service reports. Japan, the world’s third largest economy, has the world’s highest level of government debt to GDP at 243 percent. – YaleGlobal