The effectiveness of the negative interest rate policy in Japan: An early assessment

摘要

This paper provides an early assessment of the effects of the negative interest rate policy (NIRP) introduced by the Bank of Japan in January 2016. We propose a simple analytic model, which shows under appropriate conditions that lowering the negative interest rate on reserves further into a more negative range by the central bank leads to lower interest rates on bonds, reduces the required rate of return from stocks, and depreciates the value of the domestic currency. We also provide the most relevant empirical information available at present on the effectiveness of the NIRP and suggest that the available evidence thus far is consistent with the results implied by our analytic model.