マイナス金利 デフレ阻止に動いた欧州中銀

The Yomiuri Shimbun
ECB adoption of negative deposit rate bold measure to prevent deflation
マイナス金利 デフレ阻止に動いた欧州中銀

The European Central Bank has introduced a bold monetary easing policy with a strong will to prevent the European economy from falling into deflation.

The ECB has decided to cut its annual policy rate to a record low 0.15 percent and lower the overnight deposit rate, which is applied to funds commercial banks park at the central bank, to minus 0.1 percent from zero percent. This makes the ECB the first major central bank in the world to adopt a negative bank deposit rate.

A negative deposit rate means that commercial banks have to pay interest at this rate, which is like a handling fee, to place funds at the central bank. The measure is expected to stimulate the European economy by encouraging commercial banks to cut back on parking excessive funds at the ECB and instead use the money to finance companies.

It also aims to lower interest rate levels in general and redress the strong euro.

The ECB is also to implement a measure to provide low-interest funds to commercial banks for up to four years. It is commendable that the central bank is trying to use every measure at hand to avoid deflation.

The European economy remains stagnant, though it has overcome the financial and debt crises of Greece and a few other countries.

The effects of the low growth rate and the strong euro have kept increase rates of commodity prices in the eurozone at less than 1 percent for eight straight months, far lower than the target of near 2 percent.

Avoiding a 2nd Japan

If the situation is left unaddressed, the eurozone will become a second Japan, which suffered from a strong yen and depression under deflation for many years. Such concerns are likely to have pushed the ECB to adopt the unconventional monetary easing measure.

Now attention is focused on whether the latest measure will achieve its intended effects. Not a few economists say the ECB’s policy rate is already close to zero and a further rate reduction will have only a limited effect.

It is also said that the introduction of a negative deposit rate will increase the burden on commercial banks and worsen their finances, leading to a minimization of new loans and higher lending rates.

Finance Minister Taro Aso said he plans to wait to see the outcome of the move. “I still can’t say whether the results will be good or bad,” he said.

Some market observers say the ECB will eventually have to resort to full-fledged quantitative monetary-easing measures like the Japanese and U.S. central banks, which have purchased a huge amount of government bonds.

However, there are many challenges for the ECB to overcome before implementing tangible measures, including deciding what proportion of government bonds would best be held by the central bank—which is responsible for the financial policy of the 18 eurozone countries—in purchasing them from member governments.

The future of the Japanese economy is looking brighter, while the United States, which has recovered its economic growth, is reducing quantitative monetary easing.

The ECB’s policy management capabilities are now being tested on how the growth of the eurozone economy can be recovered to help achieve the stabilization of the global economy.

(From The Yomiuri Shimbun, June 7, 2014)

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