Bank of Japan sends interest rates negative

Correct Europe generally has negative interest rates. The banks just haven't passed it on for pragmatic reasons (eg fear of bank runs, fear of people stacking money under mattress killing consumer market and dragging down much needed inflation)

Europe is basically messed up big time, but without Japan's debts. If I were more ambitious I should be there snapping up opportunities.

 

This is a great point. What exactly have they got planned to mitigate this?

 

Nothing that's why they don't actually pass on negative rates to bank customers.

Economics say if you lose money by depositing, you would want to spend your money and this would stimulate inflation and rates would reverse.

In reality you would run the bank, store your money under your mattress if you're patrotic until things got better or send all your savings to USA if you werent.

 

Had an interesting discussion about negative rates with an economist friend. He pointed out several stunning paradoxes:

- According to Keynes, in a loan situation, interest is the money paid by the borrower to compensate for the lender’s loss of capital use during a certain period of time. If the lender is now paying the borrower, it means that time has reversed. We’re going back in time!

- If we insist time hasn’t changed direction then we have to accept that a loss of capital use (or the use of any type of possession) is really a gain. We property owners should pay renters, go bankrupt and thank them for that.

- Negative interest rates may be illegal because by law the borrower has to pay back all the money he owes. If he's now allowed to repay only part of it, theft is legal.

Just theorising, but it was fun.

 

I know an old timer who stored money under the 'mattress' - but it was a waterbed. Was under the heater. They toasted the money. They were fortunate they didn't disturb it too much when they found it, the bank exchanged it all.

 

I remember watching a documentary where they talked about how Japan tried to import a new generation of workers from other countries to solve their aging population problem. Only to then have the existing Japanese people reject the foreigners and deny them work.

 

Still there

Under its yield curve control program, the BOJ will continue to set short-term interest rates at minus 0.1 percent, while guiding 10-year Japanese government bond yields to around zero percent to support the economy, still in the midst of a recovery from the COVID-19 fallout

BOJ stands pat on ultra-low rate policy, yen tumbles.