2. Adverse effects of the negative short-term policy interest rate With regard to the adverse effects of guiding the short-term policy interest rate in negative territory, there is a risk that the financial intermediation function would be impaired through a deterioration in financial institutions’ profits.
Bank of Japan’s monthly report of recent economic and financial developments Bank of Japan, Communication, 21/1/99. The Bank’s View The economic deterioration in Japan is easing gradually mainly due to the increase in public investment. With respect to final demand, business fixed investment has been declining significantly, and housing investment continues to be sluggish. Private consumption, as a whole, remains stagnant.