how negative interest rate doesn’t harm a country’s economy like in Japan?
In: Economics
To be totally clear, not all interest rates in Japan were negative. The central bank sets rates that banks use not that consumers use. I’m not an expert on Japanese monetary policy, but for most Western countries central banks set (or strongly influence) the rates for lending between banks and the interest the Bank of Japan pays on deposits to consumer banks. Banks literally have cash accounts just like you and I, but those are held at the central bank.
If the deposit rate is negative, then banks will hold less cash, and instead use it to fund loans to business and consumers (at positive rates).
Latest Answers