BOJ unveils negative interest rate policy

giving them an incentive to boost lending, which in turn should help fuel the Japanese economy

Rates would have to be much more negative, methinks, before it will suddenly become attractive to lend money to dodgy borrowers.

Japan needs politicians to act, not central bankers.

officials struggle to convince cautious firms to usher in big wage hikes to stir spending and drive up prices.

Hard to think that negative interests is going to suddenly do the trick.

spending by households in December fell 4.4% from a year ago

Without any sales tax hike to blame? What's up with that then?

Policymakers hope that putting more cash in shoppers’ wallets will spur spending and move Japan closer to the bank’s inflation target.

Unless banks start paying people to borrow money, it's hard to see how this latest move would support that aim. Even then it's unlikely to work. If people are paid to borrow money, they will borrow it, save it, pay it back, and keep the profit. No guarantees that they will spend it.

A falling price spiral in Japan for years put consumers off buying in the hope of getting goods cheaper down the road, denting firms’ expansion and hiring plans.

How did this become gospel? Isn't a much more likely explanation for falling prices a reduction in demand? I find it hard to believe that consumers' spending patterns were a result of retail sales trends.

It's not gospel, just an AFP article. I don't think we read such explanation from Reuters or other business news outfit.

Are you kidding me? I've seen that exact quote dozens and dozens of times. It's also constantly repeated by politicians who seem to think the only way to get consumers spending again is to threaten them with higher prices in the future (because of inflation)

Good news for stocks and exports, I guess. Not much good for anything else.

"A falling price spiral in Japan for years put consumers off buying in the hope of getting goods cheaper down the road..."

If that were true, no one would have bought flat screen TVs, tablets, and a host of other tech-related products.

A falling price spiral in Japan for years put consumers off buying in the hope of getting goods cheaper down the road, denting firms’ expansion and hiring plans.

BuBuBu, you are of course correct: this drivel is inserted into article after article by people who must be on the LDP payroll. It does not stand up to even the slightest rational scrutiny -- is anyone in the world going to not buy a liter of milk today because a year from now it might cost 0.1% less? It doesn't even make sense for durable goods, because putting off buying them means you lose out on the utility of having them sooner instead of later. (My cell phone will probably cost 50% less as soon as a year from now... but I bought it now because I want to use it now.)

Abe, the LDP, and the BOJ are banking on the old adage that if you repeat a lie long enough and loudly enough, people will believe it. When you have an entire nation's media cowed into repeating your propaganda, it's hard for any dissenting voices to be heard.

BuBuBu, I don't mean to say you are wrong, only that AFP is the frequent media culprit.

The politicians of course want to pretend there is not enough money, because they want to spend it all to buy votes.

ThonTaddeo,

From the market reaction, plenty of people are buying into this, although after the initial 3% rally in the stock market it all sold off, before rallying 3% again. That secondary sell-off reaction was the one that made most sense to me.

Good luck to those who own Japanese stocks

From the market reaction, plenty of people are buying into this,

They're reacting rationally to the BOJ's cash-devaluing actions, but I don't think that means they're buying into Abe and Kuroda's snake oil about how debasing and devaluing the people's savings will somehow create a strong economy.

Good luck to those who own Japanese stocks

I instead wish for good luck to those who own Japanese cash (i. e., the entire population). These are the people who are going to need it! Stock investors don't need luck; they have Abe and Kuroda rigging things in their favor!

Devaluing the ¥ will attract foreign tourists. On the one hand, that will be good, on the other hand, it makes imports more expensive. But on the third (unseen) hand, it plays into the TPP objectives of Abe's government and its TPP partners. Sit back and watch, don't panic.

So... with a negative interest rate, doesn't that mean you're paying some of your savings to the bank every month? I would think this would discourage anyone from saving money.

ThonTaddeo, yes in the short term at least those gambling in the Japanese stock market could make some easy money, but as a long term investment I think people holding Japanese stocks will be needing a lot of luck.

Maybe its, and I'm just spit-balling here, because people don't have as much disposal income as they used to. Because, and I'm just spit-balling again, we are twenty-five years going strong into the 'lost decade"...

with a negative interest rate, doesn't that mean you're paying some of your savings to the bank every month? I would think this would discourage anyone from saving money.

The measure applies only to financial institutions with accounts at the Bank Of Japan.

But in theory banks could start charging depositors to hold their money. Apparently research suggests that until around minus 2%, people would leave their money in the bank rather than cash it out, because of the cost / risk of storing paper cash outside of a bank.

I guess stuff like gold might become a little more popular too.