Negative Rates Adopted by BOJ Pushes Lending Rates Down to Record Lows

Negative Rates Adopted by BOJ Pushes Lending Rates Down to Record Lows

In February, the lending rates in Japan touched its record low level. It was the very first month of BOJ trying its negative interest rate policy. That offered signs of hope for the under the weather economy but emphasizes the hit which the profit margins of the commercial banks will take.

According to data released by the Bank of Japan on Wednesday, in February, the mean lending rate for the balance of loans that has been made by domestic banks was at 1.098 percent. That further extended a record low for the consecutive fourth.

The data showed that loans extended for more than one year were charged at an average interest rate of 1.084 percent. Those for a shorter term were charged an average of 0.757 percent. But both were at their record lows.

BOJ surprised the markets by its January decision to adopt a policy of adopt a negative interest making new efforts to push borrowing costs further down and revitalize an economy dodging recession.

The data highlights BOJ's view that its insistent money printing as well as negative rates would help in pushing down borrowing costs. However, that does not guarantee more spending by households and companies.

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