 Pushed Past the Limit? How Japanese Banks Reacted to Negative Interest RatesGee Hee Hong and John Kandrac No 2018/131, IMF Working Papers from International Monetary Fund Abstract: In this paper, we investigate how negative interest rate policy (NIRP) introduced in January 2016 by the Bank of Japan (BoJ) affected Japanese banks' lending and risk taking behavior. The BoJ's announcement was an unexpected surprise to the market and was followed by a sharp drop in equity prices of Japanese financial firms. We exploit the cross-sectional variation in the change of share prices on the day of the announcement to measure banks' differential exposure to NIRP. We show that more exposed banks increased their credit and took on more risk compared to banks that were less exposed to negative rates. Keywords: WP; central bank; interest rate; NIRP announcement; bank control; Negative interest rates; monetary transmission; bank risk taking; lending channel; asset growth; bank risk; NIRP impacts bank; bank-industry credit panel; bank share; NIRP exposure; abnormal returns; return on assets; bank stock; Asset prices; Loans; Central bank policy rate; Bank deposits; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2018/131 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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