Essay On Negative Interest Rate Policy

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No, the new monetary policy which is negative interest rate did not project positive outcomes. There are few reasons why Negative Interest Rate Policy (NIRP) is ineffective in Japan. The major reason that Japan cannot achieve positive outcomes like europe is due to the aging population in Japan. For instance, Japan is experiencing ‘super aging’ society, not just in rural area but also in urban area. When Japan adopted Negative Interest Rate Policy (NIRP), this causes too much of money flow into the market and this will indirectly increase the price level of goods and services. Therefore, real income will eventually decrease as the price level of goods and services increase. For example, the retired people who lived based on pension fund will begin to save their money and spent less on consumption. Hence, when the government introduced NIRP, most people started to stash their money under the mattress and in safe. This causes a phenomena which the sales of safes in market doubled up. The government of Japan adopts NIRP is to increase the velocity of cash and to stimulate the economic growth, but instead of bringing benefits to the economy, it actually brought unexpected negative outcomes to Japan. In addition, the uncooperative firms in Japan is one of the reasons why the new policy failed to achieve positive outcomes. Negative interest rate policy is to encourage banks to lend their money to household and business to put it to more productive…show more content…
Japan implemented Negative Interest Rate Policy (NIRP) is to solve economic problems like inflation. Although Negative Interest Rate Policy (NIRP) was soon implemented, the inflation problem was not solve properly . At that time, global economies are very poor, global export rate are slumping and global currency are not stable. Currency of USD depreciate and bring negative effect to

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