Introduction of Minus Interest Rate
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 Home > Introduction of Minus Interest Rate
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 recovers.
 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.

    
  

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   Introduction of Minus Interest Rate (PDF)
Contents
   Preface
   The meaning of currency
   What is Interest rate?
   Decision method of interest rate
   Difference between interest rate and economic growth rate
   The influence of government activity to interest rate
   Calculation of basic interest rate
   Currency is fractal structure
   Deflation occurrence rule
   Occurrence status of bad debts by difference between interest rate
      on loans and economic growth rate
   Mechanism of Japanese recession
   Necessity for minus interest rate
   Effect of introduction of minus interest rate
   Improvement of banking system
   Change of interest rate decision rule
   Increase of assets caused by minus interest rate
   Reconstruction of economic theory
   Solution of deflation problem
   What is real richness

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