Japan has joined the EU, Denmark, Switzerland and Sweden in imposing negative interest rates.
Indeed, more than a fifth of the world’s GDP is now covered by a central bank with negative interest rates.
The Wall Street Journal notes:
TOKYO—Japan’s central bank stunned the markets Friday by setting the country’s first negative interest rates, in a desperate attempt to keep the economy from sliding back into the stagnation that has dogged it for much of the last two decades.
The country is desperate to increase spending and investment.
Japan has been desperate to boost consumer spending for years. At one point it even issued shopping vouchers to stimulate demand.
The New York Times writes:
Moving to negative rates reflects a measure of desperation on the part of central banks. Their traditional tools have been largely exhausted, as most countries’ interest rates have been pushed to almost nothing.
MarketWatch’s senior markets writer, William Watts, notes:
This might not be the sort of capitulation stock-market investors were anticipating.
The Bank of Japan’s surprise decision Friday to start charging depositors for parking excess reserves at the central bank triggered a global equity rally. But several monetary policy watchers and market strategists worried that the move was an acknowledgment that the world’s central banks are running out of ammunition in the battle against deflation.
“This is an interesting move that looks a lot more like desperation or novelty than it looks like a program meant to make a real difference,” said Robert Brusca, chief economist at FAO Economics.
Kit Juckes, global macro strategist at Société Générale, underlined the moment in a note to clients:
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