Finally, the BOJ did it! The country’s major bank imposed negative interest rates and on Tuesday, they came into effect. It’s no wonder that global financial markets negative reacted to the BOJ’s negative plan.
For instance, the benchmark Nikkei index fell 8.5%, despite Monday’s sharp rebound, while the Japanese yen grew 6.5% against the greenback.
Meanwhile, Japan’s bank stocks dropped 30%. It feels like they are reluctant to pass on the newly imposed rates to savers. Considering before these negative rates, savers already had rather a low interest on their deposits, it’s not difficult to predict their anger as for the necessity to pay to save. Most probably, negative rates will decrease bank operating profits by 8-15%. This radical plan definitely points out to the BOJ’s lack of options to boost growth.
The Bank of Japan, which announced this shocking decision, is going to charge other banks 0.1% for parking extra reserves with the country’s central bank in order to encourage banks to lend and help savers and businesses to invest and spend.
However, though the announcement dragged down the major Japanese currency as well as buoyed Japan’s stock prices, financial markets rapidly went into reverse.