Introduction of Minus Interest Rate
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 Home > Introduction of Minus Interest Rate
Occurrence status of bad debts by difference between
interest rate on loans and economic growth rate
<Comparison between growth rate of (nominal) GDP and interest rate on loans>
Year GDP
(¥1 billion)
Growth rate
(%)
Loan balance
of banks

(¥1 billion)
Interest rate
on loans

(%)
Difference
(%)
Amount
of loss

(¥1 billion)
1984 305,144 6.85 210,479 6.54 -0.30 -639
1985 324,290 6.27 237,170 6.27 -0.01 -20
1986 339,363 4.65 300,165 5.29 0.64 1,914
1987 355,522 4.76 337,784 4.92 0.16 536
1988 379,657 6.79 372,175 4.96 -1.83 -6,798
1989 406,477 7.06 412,407 6.43 -0.63 -2,612
1990 451,473 11.07 443,304 7.68 -3.39 -15,009
1991 474,993 5.21 462,644 6.50 1.29 5,979
1992 483,607 1.81 473,913 5.20 3.39 16,054
1993 489,891 0.89 479,977 4.18 3.29 15,807
1994 491,640 0.77 480,267 4.00 3.23 15,506
1995 504,038 2.52 486,356 2.71 0.19 911
1996 516,729 2.52 488,290 2.50 -0.02 -92
1997 521,153 0.86 493,023 2.37 1.52 7,483
1998 514,418 -1.29 488,820 2.22 3.52 17,184
1999 510,687 -0.73 468,810 2.05 2.78 13,020
2000 515,478 0.94 463,916 2.05 1.11 5,145
2001 502,602 -2.50 448,223 1.88 4.37 19,609
Amount of loss(1984〜1990) -22,628
Amount of loss(1991〜2001) 116,604
*Difference is calculated by (Interest rate on loans−Growth rate)
*Amount of loss is calculated by multiplying Loan balance of banks by Difference
*These numbers are referred to economic directory 2003 edition (Edited by Economic and Social Research Institute)
 Difference between interest rate on loans and nominal economic growth rate is written in tabular form. In addition, how much debtor’s loss has occurred is calculated by multiplying loan balance by the difference.
 What is surprising, loss of 110 trillion yen has been occurred for 11 years from 1991 to 2001. Loss of 10 trillion yen, about 2% of GDP has occurred per year averagely.

 Essence of present bad debt problem may be understood in this table. Interest rate on loans over economic growth rate is essential factor of new occurrence of bad debt. Interest can’t be paid because economic value doesn’t increase over economic growth rate. It is not applied to a specific company with excess liabilities. Interest can’t be paid by average company in Japan.
 Another asset must be sold in order to repay excess interest. Companies in Japan have been doing it since 1991. Asset has been lost by selling it for over 10 years. Therefore it is impossible to repay, and companies fail.

 [Interest rate must be plus]. This way of thinking has no theoretical root. As a result of interest rate management on condition of this premise, huge loss has occurred in companies in Japan. And responsibility of the loss is shifted to major banks, financial center.
 If the status that interest rate on loans is over economic growth rate is continued as what it is today, bad debt occurrence continues. Bad debt depresses business by deflation occurrence rule. Present plus interest rate policy makes economy of Japan destroyed.
 Nominal economic growth rate in the January-March quarter in 2003 was minus. In government economic prediction, nominal economic growth rate is ?0.2% in 2003.

 If economic growth rate is minus and interest rate on loans is plus, bad debt occurs inevitably. But government can’t understand it. If interest rate on loans of banks is 1.8%, bad debt of 8〜9 trillion yen will occur for a year. (All bad debts will not always surface. Loss will occur potentially.)
 In short, government permits the occurrence of bad debt. Nevertheless, in case of actual occurrence of bad debt, government shifts the responsibility to management of banks. Don’t you think it terrible? The mistake of lender policy is shifted to private company.
 After understanding what is written above, government should begin to create laws in order to introduce minus interest rate as soon as possible. Otherwise Japanese economy can’t be recovered eternally.

    
  

                                          --> Japanese
   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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