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The Effectiveness of the Negative Interest Rate Policy in Japan: An Early Assessment

Author

Listed:
  • Yuzo Honda

    (Department of Informatics, Kansai University)

  • Hitoshi Inoue

    (Faculty of Economics, Sapporo Gakuin University)

Abstract

This paper examines the effects of the negative interest rate policy (NIRP) introduced by the Bank of Japan in January 2016. It has effectively stimulated private residential investment, and in lowering long-term interest rates, it has likely supported private nonresidential investment. There is also reason to believe that it likely stopped the appreciation of the yen and arrested the downward trend in Japanese stock prices around August 2016. Overall, we find that the NIRP has had expansionary effects, and therefore serves as a legitimate policy tool in alleviating Japan fs zero-interest rate lower bound, notwithstanding some potential negative side effects.

Suggested Citation

  • Yuzo Honda & Hitoshi Inoue, 2017. "The Effectiveness of the Negative Interest Rate Policy in Japan: An Early Assessment," Discussion Papers in Economics and Business 17-02, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1702
    as

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    References listed on IDEAS

    as
    1. Yuzo Honda, 2014. "The Effectiveness of Nontraditional Monetary Policy: The Case of Japan," The Japanese Economic Review, Japanese Economic Association, vol. 65(1), pages 1-23, March.
    2. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    3. Yuzo Honda & Hitoshi Inoue, 2015. "Three Alternative Hypotheses On The Yen-Dollar Exchange Rate Over The Last 30 Years," Discussion Papers in Economics and Business 15-15, Osaka University, Graduate School of Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Negative Interest Rates; Residential/Nonresidential Investment; Foreign Exchange Rates;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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