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On the Effects of A Negative Interest Rate Policy

Author

Listed:
  • Yuzo Honda

    (Department of Informatics, Kansai University)

Abstract

This paper reports what effects the negative interest rate policy (NIRP), introduced by the Bank of Japan in February 2016, brought about on the Japanese economy. First, NIRP was very effective in stimulating Private Residential Investment. Second, it lowered the long-term interest rate and was likely to have supported Private Non-Residential Investment. Third, there is a reason to believe that it probably stopped around August 2016 the yen appreciation trend in the foreign exchange rates. Fourth, it was also likely to have stopped the downward trend of stock prices around August 2016. Overall, NIRP was empirically found to have expansionary effects. It is a legitimate policy tool to alleviate the zero interest rate lower bound, though due considerations should be given to its side effects at the same time.

Suggested Citation

  • Yuzo Honda, 2016. "On the Effects of A Negative Interest Rate Policy," Discussion Papers in Economics and Business 16-32, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1632
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1632.pdf
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    More about this item

    Keywords

    Negative Interest Rate; Residential Investment; Non-Residential Investment; Foreign Exchange Rate;
    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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