Bank of Japan introduces negative interest rates

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Japan`s central bank announced that commercial banks would be charged 0.1% on certain current account deposits in a hope that negative interest rates would encourage them to make more loans and stimulate investment and development.

This is the first time the Bank of Japan has introduced negative interest rates, and this sudden move had an express influence on financial markets. Japan`s benchmark Nikkei 225 stock index immediately leaped higher on the news. It ended the trading session up 2.8% at 17,518.30. China`s Shanghai composite advanced 3.1% to 2,737.60. The Japanese yet initially slid after the announcement before recovering to rise 1.7% against the dollar to 120.79.

The Bank of Japan also announced it would divide deposits into three categories with positive, zero and negative interest rates.

This measure will be in effect as long as it takes to achieve a target inflation of 2%, and the deadline to reach this goal has been changed in the meantime from end-2016 to mid-2017.

Inflation rate in Japan in 2015 was at 0.5%.