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Impacts of Japan’s negative interest rate policy on Asian financial markets
Author(s) -
Fukuda Shinichi
Publication year - 2018
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12253
Subject(s) - spillover effect , interest rate , economics , profitability index , monetary economics , financial market , stock (firearms) , monetary policy , finance , macroeconomics , geography , archaeology
This study explores the spillover effects of Japan’s negative interest rate policy (NIRP) on Asian financial markets. Unlike quantitative and qualitative monetary easing (QQE) without a negative interest rate, the NIRP not only had limited impacts on the Japanese economy but also raised serious concern about the profitability of local financial institutions. It is, thus, likely that its spillover effects were different from those of QQE without a negative interest rate. In the analysis, we examine the spillover effects on Asian stock markets. We find that Japan’s long‐term interest rate decline had significantly positive effects on Asian stock prices in the NIRP period. The results imply that the NIRP, which lowered the long‐term rate below zero, might have benefitted Asian economies. We discuss that this might have happened because local financial institutions that lost their profit opportunities in domestic markets explored a new profit opportunity in emerging Asia after the NIRP was announced.