|Effect of introduction of minus interest rate
If minus interest rate is introduced, it leads to yen selling pressure, so yen is lowered. Sales increase in export industry because sales price is lowered when yen is lowered.
In addition, lower yen means Japanese wage level is lowered. The reason
of [hollowing out of industry] is that Japanese wage level is higher than
that of Asian nations. As gap is diminished by lower yen, it is effective
in decreasing hollowing. This leads to increase of number of payrolls,
or unemployment policy. If unemployment man decreases, consumption increases,
so the economy recovers.
Companies are forced excessive burden of interest rate as much as difference
between interest rate on loans and economic growth rate. If this burden
is lost through minus interest rate, it is not necessary to decrease labor
cost excessively. As a result, employment increases and number of unemployment
man decreases. As described above, minus interest rate becomes direct unemployment
policy. As a result, consumption increases by income increase, and economy
If minus interest rate is introduced, function of banks recovers. Minus interest rate means decrease of balance of loans (amount of assets). Therefore, amount of bad debts decreases. As described above, minus interest rate produces an effect straight as countermeasure against bad debts. If bad debts decrease, diminish of economy caused by [Deflation occurrence rule] can be stopped.
In addition, as new occurrence of bad debts caused by difference between
interest rate on loans and economic growth rate is stopped, cost of bad
debts disposal is lost. Own capital can be increased to that extent. If
own capital increases, collection of loan fund called “credit withdrawal”
is not needed. Loan fund is collected because of capital adequacy rule.
If own capital increases, amount of loan fund can be increased, so “credit
withdrawal” is not needed.
If minus interest rate is introduced, interest can be accepted by loans, so demand of fund increases. It leads to various investments and Japanese economy returns to growth.
Interest rate on loans has been higher than economic growth rate for more than 10 years. Therefore, it will be necessary for interest rate on loans to be lower than economic growth rate for more than 10 years in order to improve balance sheet of companies. Thinking simply, debtor’s loss for past 10 years can be recovered by this method. Then, bad debts disappear and funds of Japanese economy flow smoothly, and economy recovers stable growth assessment.
If bad debts decrease and financial strength of companies is recovered,
price of equity rises. As rise of equity price means increase of assets
of nations, consumption is increased. Performance of company recovers by
increase of consumption. Japanese economy recovers by this circle.
For these reasons, it might be understood how effective introduction
of minus interest rate is for Japanese economy.
Some people think minus interest rate leads to moral hazard, but it is only misunderstanding caused by lack of essential understanding of interest rate. Under the condition of minus economic growth rate, value of currency decreases averagely. It is theoretically inevitable conclusion for bad debts to increase without introduction of minus interest rate.