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The effectiveness of the negative interest rate policy in Japan: An early assessment

Author

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  • Honda, Yuzo
  • Inoue, Hitoshi

Abstract

This paper provides an early assessment of the effects of the negative interest rate policy (NIRP) introduced by the Bank of Japan in January 2016. We propose a simple analytic model, which shows under appropriate conditions that lowering the negative interest rate on reserves further into a more negative range by the central bank leads to lower interest rates on bonds, reduces the required rate of return from stocks, and depreciates the value of the domestic currency. We also provide the most relevant empirical information available at present on the effectiveness of the NIRP and suggest that the available evidence thus far is consistent with the results implied by our analytic model.

Suggested Citation

  • Honda, Yuzo & Inoue, Hitoshi, 2019. "The effectiveness of the negative interest rate policy in Japan: An early assessment," Journal of the Japanese and International Economies, Elsevier, vol. 52(C), pages 142-153.
    • Handle: RePEc:eee:jjieco:v:52:y:2019:i:c:p:142-153
    DOI: 10.1016/j.jjie.2019.01.001
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    Citations

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    Cited by:

    1. Gunji, Hiroshi, 2024. "Impact of the Kuroda Bazooka on Japanese households’ borrowing intentions," Japan and the World Economy, Elsevier, vol. 69(C).
    2. Afees A. Salisu & Abdulsalam Abidemi Sikiru, 2023. "Stock returns and interest rate differential in high and low interest rate environments," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1713-1728, April.
    3. Takatoshi Ito, 2021. "An Assessment of Abenomics: Evolution and Achievements," Asian Economic Policy Review, Japan Center for Economic Research, vol. 16(2), pages 190-219, July.
    4. Xin, Baogui & Jiang, Kai, 2023. "Central bank digital currency and the effectiveness of negative interest rate policy: A DSGE analysis," Research in International Business and Finance, Elsevier, vol. 64(C).
    5. Wei-Shen Li, 2022. "The Stock Price Performance and Return Style of the Pan-Infrastructure Reits Corporation: Evidence from U.S. and Japan Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(3), pages 100-100, February.

    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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