Interest Rate :: essays research papers

The Bank of Japan (BOJ) carried bulge the zero following esteem policy. The decrease of the interest rate was expected to work for retrieval of the Japanese economy. The interest rate was already very low and the analysts curiosity its effectiveness. Due to the collapse of the bubble economy, the Japanese economy became sluggish and suffered from six trillion dollars debt. The increase of the government bonds caused the increase of the loan rte. It also caused the understanding of yen and damaged the Japanese trade companies because the stocks of the Japanese export companies were to a greater extent and more sold. Because the Japanese economy is largely supported by the Japanese export companies, this situation worked against Japan.In January, 1999, the Japanese government issued twice as a lot government bonds as usual. Soon later, the BOJ decided to decrease the interest rate to zero in short-term money market. Consequently, life insurance companies, which bestow money t o banks and earn money by its interest before, were forced out of disdain in short-term money market. Life insurance companies kinda began to buy government bonds. Due to the increase of the demand of the government bonds the grade of the government bonds remained the same even though the government issued bonds too much. As a result, the interest rate did not rise and money tote up did not decrease. The zero interest rate policy was to some terminus successful this time, but the interest rate cannot be decreased more than zero when the value of the government bonds decreases next time. Besides, most companies did not dramatize from banks to invest new facilities even the interest rate is zero. Most companies had to downsize the agreement and reduce employees and corporate bonds to survive in the recession. Even if they started new business and made new goods, Japanese consumers would not buy such things.