The effectiveness of the negative interest rate policy in Japan: An early assessment


This paper provides an early assessment of the effects of the negative interest rate policy (NIRP) introduced by the Bank of Japan in January 2016. We find that the NIRP has effectively stimulated private residential investment, and by lowering long-term interest rates, has likely also supported private nonresidential investment. There is also reason to believe the policy has likely halted the appreciation of the yen and arrested the downward trend in Japanese stock prices around August 2016. Overall, we find that the NIRP has had expansionary effects on the Japanese economy, and therefore serves as a legitimate policy tool in alleviating Japan’s zero-interest rate lower bound, notwithstanding some potential negative side effects.