Under a three-tier system, the Bank of Japan (BoJ) introduces a negative interest rate (-0.1%).

Haruhiko Kuroda did it again. After having continuously denied the idea of using a negative interest rate, the governor of the Bank of Japan (BoJ) has now decided to introduce one. More specifically, the BoJ will adopt a three-tier system in which the outstanding balance of each financial institution’s current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate or a negative interest rate will be applied, respectively (statement). This new programme is called “Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate” and was passed with a 5-4 majority vote. The size of the BoJ’s monthly asset purchases has been left unchanged (annual pace of JPY80 trillion), but the timeline to reach the inflation target of 2% has been (once again) delayed by six months (now around the first half of fiscal 2017).

Negative rate likely applied to a very small share of deposits, initially Under the three-tier system, a positive interest rate of 0.1% will be applied to the basic balance, a zero interest rate will be applied to the macro add-on balance and a negative interest rate of -0.1% will be applied to the policy-rate balance.

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