Global View February 2016: What Do Negative Japanese Interest Rates Really Mean?

The Positives in Japan's Negative Rate Decision

Japan’s surprise shift to negative policy rates looks a carefully scripted attempt to deliberately weaken the Yen, possibly because policy-makers fear a much lower Chinese Yuan. Since this further delays what we see as an inevitable (Yen positive) fiscal policy easing, we now expect more near-term Yen weakness. Looking more broadly, the BoJ move signals that negative rates have become an acceptable policy-option and one that the US Fed could also embrace. A higher gold price may be the obvious winner from this general breaking of the zero lower bound (ZLB).