Bank of Japan will consider at its own policy meeting next week to cut borrowing costs deeper into negative territory.

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Ricky L • a second agoRemove

I think consumer confidence is a measure of whether business will borrow from banks to invest and produce.

Cutting interest rate to negative will not prompt business to borrow from banks to invest and produce - that help to prop up GDP - if consumer confidence is low and is not buying.

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Negative interest rate will not motivate consumers to spend.

It has the reverse effect of bringing down consumer confidence in the Economy - and in return curb spending. This will not boost GDP.

Only when consumer confidence rises, will consumer spend. Only then will business invest and produce - and business will borrow from banks even thought interest rate is high due to increase in business confidence - because revenue from consumer spendings will cover borrowing cost.

In fact, Japan should concentrate on improving international trade to boost business confidence - which in turn cause business to invest more and produce more, which in turn create more jobs and boost consumer confidence and will result in more domestic consumer spendings.

Thus negative interest rate or lowering interest rate is not a fool-proof solution to boost consumer spendings or business spendings --- in fact, it has the reverse effects of demotivating consumer confidence and business confidence - and will contribute to lower spendings and lower investments - and bring down Economic Growth.