Bank of Japan just did it.
We're entering uncharted waters boys. Smarter men then me, provide us with an education.
What does this mean lmao, does it mean that if you have money in the bank they start taking money away from you
It's an attempt to boost inflation. The commercial banks park "excess reserves" at the central bank.
The negative interest rate means it costs the commercial banks money to do so, therefore they shift some of their excess reserves out and into the economy.
The JPY weakened against the US dollar on the news. Capital moved out of Yen and into equities everywhere. Including US equities.
Hence also good news for stocks.
This is basically the monetary policy equivalent of the engine stalling, so you hit the "nitro" button to give it another push.
Wouldn't the banks pass that cost onto consumers somehow?
What's the likelihood of something like that happening in the US do you guys think? I'm saving for another home sitting on a lot of cash right now so news like this worries me desu.
>What's the likelihood of something like that happening in the US do you guys think?
>I'm saving for another home sitting on a lot of cash right now so news like this worries me
Put your money in a short-term treasuries mutual fund. Better return than a savings account with no additional risk.
Learn to speak proper English, or learn or how the filter works. We're adults here.
Alright here's my understanding of this.
The negative interest rate is an inter-bank rate for banks holding money in their reserves from other banks.
This is NOT the rate that the average person gets from the bank, (that's up to the bank to decide and it still is positive).
The reasoning for this change is to do with how the government gets the economy growing.
At the moment our growth paradigm is this: If we lend the right people money then they will invest that money in the best way possible, and the whole country will benefit from it.
The way they'd expect it to be done is buisness owners and the public take out loans from the bank and invest it wisely to grow the economy.
What was actually happening is the banks we're so sacred of lending people money. (They didn't think people knew the best ways to invest it). The banks chose instead to lend that money to other banks and collect a small safe interest rate. (Banks borrow off other banks to satisfy the 'minimum required amount of money held by a bank rule'.)
What this actually meant though is that the growth of the economy slows down because loans are hard to get etc. You can't start up a new robot business because the bank won't give you the 2 million dollar loan, because they would rather put that 2 mill in a safe place and collect the interest.
In steps the fed with a negative interest rate that says to the banks "If you lend that money to another bank instead of getting a safe positive interest rate.. you will slowly LOSE that money"... This spurrs investing from the banks, lots of loans etc.
This isn't uncharted waters, a few European countries have tried it. It's actually a very good thing.
I keep hearing how they're out of 'bullets' so to speak so it makes me nervous. Hopefully helicopter money before we get to that point if it comes to that.
I've been considering the treasuries. I'm still researching it.
I like the word filter senpai.
>I keep hearing how they're out of 'bullets' so to speak so it makes me nervous
Japan is Japan. QE has never really worked there, certainly not as effectively as the U.S. But its just Japan. A second-tier l financial player in the global finance market. Japan has limped along or stumbled for 20 years and it hasn't affected anything on the other side of the Pacific, other than cheaper imports.
Don't become an alarmist. Or if you do, head to /pol/ where you'll fit in better.
That's pretty much what I was thinking. Far from an alarmist though, just healthy concern and curious what others thoughts were on it.
/pol/ isn't my speed. If I wanted useless banter I'd turn on MSNBC or FOX.
In part yes. It wasn't that Japan is "unsafe" so much as the Jap banks had an incentive to shift their reserves into higher yield markets.
Japan *is* a bug looking for a windshield in terms of their monetary economy BUT..
...Their real economy is pretty awesome and most of their sov. debt is held internally. I am actually pretty bullish on Japan long term, provided they don't do something crazy like go full commie when the monetary system stumbles.