Negative Interest Rate
Lets start off with what a negative interest rate is. A negative interest rate is when depositors are actually charged an amount of interest to keep their money in an account with the bank.
The Bank of Japan has recently announced they will be charging negative interest rates in order to inflate their own economy. How do these interest rates work? The bank basically wants to dissuade lenders from putting cash in the bank. In return, they hope for the lender to lend to individuals and businesses for their use. By lending to individuals and businesses, this will hopefully boost the economy and help with inflation.
The global economy, as we all know, has been descending slowly. This will be Japans attempt to inflate their economy. Yes, other central banks have done this, Sweden and Switzerland.
In summary, using the negative interest rate will theoretically reduce the cost to borrow for the companies and households which will then increase the demand for some loans and investments, along with consumer spending.
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Chris Barto
In summary, using the negative interest rate will theoretically reduce the cost to borrow for the companies and households which will then increase the demand for some loans and investments, along with consumer spending.
https://www.facebook.com/chrisbartoinvesting/?ref=bookmarks
Chris Barto
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