eli5 What does it mean that japan had negative interest rates?

Question

I understand that this is designed to stop deflation, but what does it mean practically speaking?

In: Economics

Answer 1

In Japan, having negative interest rates means that instead of earning money on their savings when they put it in the bank, people actually have to pay the bank to hold onto their money. It’s like a reverse situation where instead of getting a bonus for saving, you’re charged a fee.

This unusual situation is a strategy used by central banks to encourage people and businesses to spend and invest money rather than keeping it in the bank. By making it costly to save, they hope to boost economic activity and stimulate growth. It’s a bit like nudging people to put their money into the economy by making it less attractive to stash it away.