Assignment

ON

Japan Interest Rate

COURSE : Essentials of Islamic Finance

PROGRAME : MBA (EVENING)

INSTRUCTOR : Mr. Irshad Ahmed

GROUP MEMBERS : Aasd Danish Siddiqui –1462

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Japan Interest Rate
The benchmark interest rate in Japan was last reported at 0.00 percent. In Japan,
decisions on interest rates are made by the Bank of Japan's Policy Board in its
Monetary Policy Meetings. From 1972 until 2010, Japan's average interest rate
was 3.50 percent reaching an historical high of 9.00 percent in December of 1973
and a record low of 0.00 percent in February of 1999. This page includes: Japan
Interest Rate chart, historical data and news.

The Bank of Japan has brought back its zero per cent interest rate policy, in an effort to
boost the country's ailing economy.

And it has guaranteed to keep the ailing banking sector afloat by flooding the economy
with money if a major bank was threatened with bankruptcy.

The Bank says it will maintain its zero interest rate policy as long as consumer prices in
Japan continue to decline. Such deflation makes consumers reluctant to spend money,
and thus increases the severity of the recession.

Financial analysts are doubtful, though, whether the new policy will help the economy.
With rates already close to zero, the move is more of symbolic than economic value.

Little impact

But with interest rates already nearly down to zero, the change in policy is expected to do
little to stimulate the economy.

Zero rates

The Japanese central bank controversially abandoned zero interest rates last August,
despite fierce opposition from politicians.

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Since then, the central bank has cut interest rates twice - the overnight rate to 0.15%
and the largely symbolic discount rate to 0.25%.

Country Interest Rate Growth Rate Inflation Rate Jobless Rate Current Account Exchange Rate
Japan 0.00% 0.37% -0.90% 5.20% 1047 84.2250

Conclusion:

The decision underscores growing worries about the Japanese economy, which is
being battered by a strong yen and persistent deflation. Recent economic indicators
point toward deteriorating exports, industrial production and corporate sentiment.

The zero interest rate policy (ZIRP) is a macroeconomic concept describing conditions
in which economies exhibit slow growth with a very low interest rate, such as
contemporary Japan

The conventional wisdom in Japan is that the country needs a weak yen to help its
exporters compete in international markets. But this dependence on exports is an
outgrowth of outdated thinking on Japan's economy. There is really no reason Japan
should be so reliant on exports. Unlike a small, open economy like Taiwan or
Singapore, exports don't account for that much of the economy – in fact, less than 20%
of GDP. The problem is that the domestic economy doesn't contribute enough to
growth.

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