When Negative Became Positive: A Critique of Negative Interest Rates

Several weeks ago Japanese policymakers “shocked the world” by announcing that they were bringing their nominal interest rate to negative territory for the first time, ever.  Of course, real yields (the nominal yields net of inflation) had been negative for almost a generation, but this policy audacity was intended to stir animal spirits, to provoke inflation, and to signal to the markets a seriousness in attacking deflation, the likes of which even Japan had not yet entertained.  Lost on ...