how negative interest rate doesn’t harm a country’s economy like in Japan?

Question

how negative interest rate doesn’t harm a country’s economy like in Japan?

In: Economics

Answer 1

The Japanese have a very different financial culture that in the US.

The Japanese are so notoriously risk adverse and save so much money that a negative interest rate that would be economically disastrous in the US is needed in Japan to force people to spend money to keep the economy going.

The US population is generally very much in debt, takes risks, spend a lot of money on consumer goods and entertainment, and there’s a great deal of keeping up with the Jones’.

The Japanese meanwhile are notoriously frugal and save lots of money. They don’t spend lavishly on vacations or consumer goods and the big expenses in life are housing and education.

It’s ground into them at a very young age to save every yen you can, get educated, get a job, and work very hard until retirement.

Taking long vacations (more than a few days) is unheard of, or considered a once in a lifetime event for the Japanese. The typical Vacation is 1 extra day to a weekend because taking any longer is considered selfish because you are making your coworkers work harder in your absence. The traditional greeting when you get back from vacation is to apologize to your coworkers for making them work extra while you were gone.

The average Japanese also avoid the stock market like the plague because letting your cash sit in a bank and get hit by inflation is better than taking any risk with your savings.

The Japanese are also notoriously cheap, common consumer goods rarely go up in price because the population doesn’t tolerate it at all.

Puchi Puchi Uranai a chocolate manufacturer had to run ads on TV to apologize for increasing the price of the product from 20 yen to 30 yen (13 cents to 20 cents American). These ads became a meme in the US because of how silly it seemed, but it’s actually a very big problem in Japanese society. Companies that raise prices like that suddenly get shunned for being greedy and lose most of their customers overnight. Hence the apology campaign.