The Bank of Japan has cut their interest rate to negative 0.1 percent.
Continuing on the ‘slippery slope’ of zero bound their statement, in part, read …
Japan’s economy has continued to recover moderately, with a
virtuous cycle from income to spending operating in both the
household and corporate sectors, and the underlying trend in
inflation has been rising steadily. Recently, however, global
financial markets have been volatile against the backdrop of
the further decline in crude oil prices and uncertainty such as
over future developments in emerging and commodity-exporting
economies, particularly the Chinese economy. 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 of Japan is not the first Central Bank to pursue a path of negative interest rates. Several other Central Banks have taken this path. That the Bank of Japan has chosen this route?
Causes us some concern.
Why? We discuss this and more in the following week in review podcast …
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