In a surprise move, the Bank of Japan has decided to introduce an interest rate of minus 0.1 percent.
The move affects current accounts held by financial institutions at the central bank, which previously offered a miniscule +0.1 percent on deposits.
The central bankers, after their 5-4 vote Friday, issued a statement warning of deeper interest rate cuts into negative territory “if judged as necessary.”
Negative interest rates – something that sounds counterintuitive – means that financial institutions, instead of receiving money for their deposits, must pay to keep their money at the central bank. This is intended to be an incentive for the banks to lend money more freely.