Bank Of Japan's Negative Interest Rate Policy, Is The U.S. Next?

In another effort to jump-start the stagnant Japanese economy, the Bank of Japan (BoJ) unexpectedly announced on January 29th that it was cutting its benchmark interest rate to -0.1%. The negative rate applies only to excess balances that exceed reserve requirements, thereby encouraging banks to increase their loans (risk-taking) in order to avoid the negative rate. Cash currently held at the central bank will continue to earn the same 0.1% interest as before, while required reserves will now earn zero interest. The BoJ also left the door open for further movement into negative territory or expansion of the monetary base 'if judged as necessary.'









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