Bank of Japan introduces negative interest policy

IN a move to boost the country’s stumbling economy, the Bank of Japan has implemented a negative interest rate policy for the first time.

A masked man walks past an electronic stock indicator of a securities firm showing Japan's Nikkei 225, left, that rose 455.02 points or 2.6 percent to 17,163.92 and the currency rates of the U.S. dollar, center, and of the euro against the Japanese yen, in Tokyo, Wednesday, Jan. 27, 2016. Chinese stocks sank again Wednesday but other Asian markets rose following Wall Street's gain as investors looked ahead to the U.S. Federal Reserve's latest statement on interest rates and the economic outlook. (AP Photo/Shizuo Kambayashi)

THE Bank of Japan has adopted negative interest rates — for the first time.

Japan is part of the world’s third-largest economy, but has been struggling in recent months.

The bank has now announced the negative interest rate policy in a move to boost the stumbling recovery. It will impose a 0.1 per cent fee on deposits left with the bank, which is effectively a negative interest rate, in hopes of encouraging commercial banks to lend more money, to stimulate investment and growth.

In other words, the bank will charge money for holding deposits.

Governor Haruhiko Kuroda’s board voted five to four to put the interest rate at -0.1 per cent on current accounts of the bank, Bloomberg reported.

The move has had an immediate impact on Japan’s stockmarket, with the index shooting higher after the announcement.

The Japanese yen has risen from 118.50 yen earlier in the day to 120.40 yen.

In a statement, the Bank of Japan said the policy would continue until they reach the inflation target of two per cent.

The timeframe has now been moved from late 2016 to mid-2017.