Is it a good time to invest in the Yen? What do negative interest rates mean?

Ask an Economist
Question: 

http://money.cnn.com/2016/07/07/news/economy/japan-yen-options-brexit/in...

- Is it a good time to invest in the Yen?
in part it's a bad idea since contractionary policies are/will be implemented to slow its growth rate, but on the other hand it's great because it's value is constantly growing despite the implemented policies.

- does having negative interest rates means that people need to pay in order to keep their money in the bank? is this a contractionary monetary policy?

Answer: 

first part:

It appears from the news analysis that Yen has appreciated too quickly against dollars and policymakers are concerned. Implicitly, yen appears to be overvalued in the short run. It is never a good idea to invest in a currency that is expected to depreciate, i.e., lose value.

second part:

Yes, negative interest rate broadly means that lenders give more to get less. Negative interest rates are usually a result of too much liquidity in the financial system. A contractionary monetary policy reduces liquidity and raises interest rates.

 

 

 

Last updated on February 2, 2017