The Bank of Japan stunned financial markets by adopting an unprecedented negative interest rate on Friday, and as the news sank in analysts began to digest the risks and possible benefits of the move.
With the move, the BOJ will charge banks 0.1 percent annually on the value of certain reserves held with it, encouraging them to lend the cash instead.
Following are questions and answers about the implications for the economy and savers’ bank accounts.
What does it mean for my savings?
The central bank’s new policy does not automatically mean regular banks have to impose negative interest rates — although if they do, savings held there would shrink.
Banks that are struggling may be most tempted to introduce negative interest rates for savers, but experts say that could also hurt them as it could lead to people pulling out their cash.
Should I stash my cash in stocks?
Experts warn financial markets may be volatile for the time being and thus risky for inexperienced, retail investors.
“It will be an ice age for those who want to invest their assets,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
“It might be a good chance for speculators due to rising volatility in the markets,” he continued. “For investors, there will be both positive and negative factors.”
On Friday, BOJ Gov. Haruhiko Kuroda expressed a positive view on the matter: “By lowering interest rates, it will have a positive impact on consumption and investment,” he said.
If I take out a mortgage, will the bank pay me?
Again, banks have not yet decided to deploy a negative interest rate policy. Experts are reluctant to predict banks paying people to borrow, at least in the near future, because the housing loan market has been overheated.
However, some believe banks may in fact raise the cost of borrowing to cover the BOJ levy on their cash holdings.
What impact will there be on the economy?
Economists remain upbeat for reasons including cheap oil and the positive outlook for the U.S. economy.
“There’s no need to adjust the forecast of a Japanese economic recovery in the spring along with the U.S. economic upturn,” said Kumano. “What I am focusing on now is by how much things will improve.”