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Economy

Lessons from Europe for the BOJ

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Bank of Japan Gov. Haruhiko Kuroda attends a news conference at the BOJ headquarters on Dec.18, 2015.   © Reuters

The Bank of Japan on Jan. 29 became the latest central bank to set its deposit interest rate below zero, at -0.1%, following Denmark, Switzerland, the eurozone and Sweden, which all adopted negative rates in the past two years.

     The BoJ's move appears to have been forced on it by the failure of policies so far to get inflation back into positive territory. Japan has attempted a sustained fiscal stimulus, which left it with a 230% government debt to gross domestic product ratio, and a large scale quantitative easing program. Negative interest rates was a logical next step, as well as a possibility opened up by lessons learned from Europe.

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