Are You Really Doing Negative Rates? - BOJ Tries to Explain

Negative rates in Japan have caused such market turmoil and questions from lawmakers and the general public that the Bank of Japan has put out an explainer in Q&A style that includes “Are you really doing negative rates?” and “What is deflation?”

The document is called “Understand Negative Rates in 5 Minutes” and was released on Friday. It appears to be aimed at people who aren’t finance professionals and includes questions about whether the policy will cause personal savings to shrink, if a negative rate was really necessary, and what is so bad about falling prices.

This follows an explainer aimed at financial markets that the BOJ released in January at the same time it announced the new policy. That initially included seven questions, and has been updated twice.

That negative rate strategy has caused bond yields to fall below zero, money market funds to stop accepting money, and lawmakers to summon Bank of Japan Governor Haruhiko Kuroda to parliament a record number of times to explain it.

“The usage of casual language clearly shows they are trying to reach out to ordinary people,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. and a former BOJ official. “This shows how desperate the BOJ is to have people understand about the negative rate policy.”

Prime Minister Shinzo Abe has been peppered with questions about the policy in parliament as law makers continue to express doubts over its impact. Abe said Thursday that the negative rate is gradually becoming more widely understood and that the BOJ took the right step.

Some of the central bank’s policy board members also expressed concern over whether the policy would increase people’s anxiety or uneasiness, according to the summary of the March meeting.

The Q&A ends with the hypothetical questioner saying “I guess I now get it, but I got nervous when I heard ‘negative rates.’"

Before it's here, it's on the Bloomberg Terminal. LEARN MORE