Bank of Japan sends interest rates negative (-0.1%)
21 replies, posted
[QUOTE]The Bank of Japan has shocked global markets by driving its official interest rates into negative territory.
In a close run five to four vote, the central bank board moved the official interest rate down a notch from 0 to -0.1 per cent.
In addition, the BoJ will maintain its quantitative easing program, expanding its asset base at a rate of 80 trillion yen ($930 billion) a year through buying up Japanese Government bonds, stakes in real estate trusts and electronically traded funds.
Source:
[URL]http://www.abc.net.au/news/2016-01-29/bank-of-japan-sends-interest-rates-negative/7125712[/URL]
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so... you pay the bank to store money in them now?
[QUOTE=aznz888;49629509]so... you pay the bank to store money in them now?[/QUOTE]
Essentially. It's designed to encourage spending rather than saving to boost the economy.
An interesting tactic. I wonder how long it will last, considering it was already hotly contested in the vote.
Back to cash savings, I guess?
[QUOTE=soulharvester;49629613]Back to cash savings, I guess?[/QUOTE]
Eh I mean its such a small shift that it won't cause something like that. Wonder how long till we see how it effects their economy
[QUOTE=soulharvester;49629613]Back to cash savings, I guess?[/QUOTE]
Inflation would suggest you should invest it rather than store it. Even the safest investment funds have a return of a fwe percent
Um can they do that?
Like the whole point of the fed raising rates was because they were giving themselves some room to work with if things got bad again
What's worrysome is that this encourages companies to go out and take out more loans, but since the markets are bad they tend to use that money to buy their own stock back instead of investing it, which leaves them with a slightly higher short term dividend but a long term debt pile, which could go badly if rates ever go up, which they need to in order to push the economy forward, these chronic low rates are already showing signs of having created a second debt bubble
[QUOTE=download;49629524]Essentially. It's designed to encourage spending rather than saving to boost the economy.[/QUOTE]
I can kind of see the rationale, but what if it has the opposite intended effect, and everyone withdraws their money and puts it somewhere other than the banks?
[QUOTE=Sableye;49629852]Um can they do that?
Like the whole point of the fed raising rates was because they were giving themselves some room to work with if things got bad again[/QUOTE]
Japan is doing it because they're running out of ways to stimulate and revive their stagnant economy. While the real problem is demographic contraction, the Japanese have to find any way they can to maintain the economy.
You're right about them having no room to work with, because now they are undermining themselves in the future to get some immediate gain. Longer term however, things are going to get much worse for Japan.
The largest bank in Denmark, Danske Bank, did a similar thing a few years back. They started charging you x amount for each account you had with them. You heard all sorts of stories of people who would take their money elsewhere, but in the end many people stayed because it's "so little" money they took and it's a hassle to move.
People starts to accept this apparently but doesn't realise, that they're supporting a bad decision that some day might cause all banks to do it.
Swiss Franc is at -0.75%.
Wouldn't this just cause people to "save" money in more risky places like the stock market? People aren't just going to waste their saving on crap all of a sudden.
[QUOTE=sgman91;49630104]Wouldn't this just cause people to "save" money in more risky places like the stock market? People aren't just going to waste their saving on crap all of a sudden.[/QUOTE]
If you're smart with your money stocks are pretty safe all around. Just don't inbest with the intention of big gains
[QUOTE=No Party Hats;49630131]If you're smart with your money stocks are pretty safe all around. Just don't inbest with the intention of big gains[/QUOTE]
Stocks are a great investment over the long term (good mutual funds average ~10% growth), but it's also undeniably more risky than a bank account. If we have another big worldwide downturn people who moved money from banks into stocks would be hurt badly. I just don't see it getting the desired effect. No one I know would suddenly decide to spend their savings on random things they previously didn't think they needed instead of shifting the savings into other forms of money.
I guess this is more targeted at big corporations saving instead of reinvesting, but we'll see.
[QUOTE=sgman91;49630156]Stocks are a great investment over the long term (good mutual funds average ~10% growth), but it's also undeniably more risky than a bank account. If we have another big worldwide downturn people who moved money from banks into stocks would be hurt badly. I just don't see it getting the desired effect. No one I know would suddenly decide to spend their savings on random things they previously didn't think they needed instead of shifting the savings into other forms of money.
I guess this is more targeted at big corporations saving instead of reinvesting, but we'll see.[/QUOTE]
If the economy did go full tits-up then you'd have a hard time getting your money out of a bank anyway. Not saying you should put everything in stocks, but throwing cash into index funds (S&P Has been [I]fucking incredible[/I] for my father) is a very viable long term plan.
ours is at -0.35 right now, been in the minus range for a year now
[QUOTE=sgman91;49630104]Wouldn't this just cause people to "save" money in more risky places like the stock market? People aren't just going to waste their saving on crap all of a sudden.[/QUOTE]
Um... This is exactly what they want people to do. Investing in the stock market leads to new factories and business being built, which creates jobs and brings in tax revenue.
[QUOTE=download;49630458]Um... This is exactly what they want people to do. Investing in the stock market leads to new factories and business being built, which creates jobs and brings in tax revenue.[/QUOTE]
shouldnt the banks be doing this anyway. When you put money into an account its not like it just sits there, they also give out loans and invest it themselves. obviously if everyone withrdrew all at once it becomes a problem but thats the point of a bank.
[QUOTE=Mattk50;49630497]shouldnt the banks be doing this anyway. When you put money into an account its not like it just sits there, they also give out loans and invest it themselves. obviously if everyone withrdrew all at once it becomes a problem but thats the point of a bank.[/QUOTE]
Money in your bank account goes into ultra-low risk (i.e. low return) investments. Low risk investments generally don't add anything to the economy because they're things like property, precious metals or bonds.
[QUOTE=download;49630458]Um... This is exactly what they want people to do. Investing in the stock market leads to new factories and business being built, which creates jobs and brings in tax revenue.[/QUOTE]
Keep in mind that a business or property will be valued much higher on stocks than book value, which could be used to say that market values are "inflated". Suffice to say money that goes around in the market doesn't directly necessitate actual "production" of value, merely value [I]of[/I] something, primarily other companies.
[QUOTE=sgman91;49630104]Wouldn't this just cause people to "save" money in more risky places like the stock market? People aren't just going to waste their saving on crap all of a sudden.[/QUOTE]
The idea is to stimulate investment and spending in the economy. Of course, all it's done so far is stimulate asset price bubbles, and we all know how great those are for economic growth.
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