Bank of Japan (BoJ) shocked markets on Friday with plans to effectively charge lenders to park their cash with it, ramping up a long-running battle to kickstart the world's number three economy.
The unprecedented decision to adopt a below-zero interest rate policy is the BoJ’s latest weapon as it looks to spur bank lending and drive up inflation. In response, the Nikkei stock index soared almost three percent as the yen plunged. BoJ chief Haruhiko Kuroda cited recent financial market turmoil and a China slowdown for ushering in a -0.1 per cent rate on new reserves, and said the bank may go even further into negative territory. Rates currently are near zero. “The Japanese economy is not isolated from the global economy,” he told reporters, after the bank's first meeting of 2016. “There has been big volatility in financial markets. Because of the uncertain outlook for emerging and commodity-exporting economies, particularly China, we see rising risks for corporate confidence” , he said.