HARUHIKO KURODA, the governor of the Bank of Japan, surprised his audience at the World Economic Forum’s recent gathering in Davos, Switzerland, when he called upon China to impose tighter capital controls to stabilise its currency—a breach of central-banking orthodoxy. Upon his return to Japan he swiftly unleashed yet another unorthodox measure, albeit one that has been spreading as central banks around the world battle anaemic inflation.
On January 29th the Bank of Japan (BoJ) said it would cut its benchmark interest rate below zero, to -0.1%, in an attempt to counteract the effects of falling oil prices and China’s slowdown. The BoJ is following the lead of several central banks in Europe, including the European Central Bank (ECB), which first resorted to negative rates in 2014.
The move is not quite as dramatic as it sounds: the new negative rate will apply only to new reserves that banks...Continue reading
Source: Business and finance http://ift.tt/1P1TKP9
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