Shinzo Abe, the leader of the opposing Liberal Democratic Party (LDP) and most likely next Japanese Prime Minister, made a statement on Thursday that he wants the Bank of Japan to encourage lending by setting its interest rates to zero or sub-zero. Abe might be a leading politician, but maybe he should brush up his math skills because you can’t really go less than zero when it comes to interest rates.
The LDP leader says he wants to combat the stagnating economy and strength of the yen against other currencies by working with the Bank of Japan. The high yen is heavily damaging Japan’s exports industry and preventing small firms from being able to compete, Abe told reporters in Tokyo. His party is leading in the public opinion right now, and as current Prime Minister Yoshihiko Noda stated yesterday that elections would be held on December 16th, it is widely assured his Democratic Party of Japan (DPJ) will lose power.
The Bank of Japan is said to be holding a policy board meeting next week about holding off on any further monetary easing until next year. It’s current loan rates, which the bank intends to keep, are between 0 and 0.1%. Should Abe get his wish for a negative interest rate, I guess the banks will have to start paying people to take out loans.
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