At last, Bank of Japan adopted negative interest rate last Friday.
The negative interest would not have been adopted because people assumed that Haruhiko Kuroda, Governor of BOJ, was not willing to choose that monetary policy, which I thought too it was impossible.
- Due to the massive QQEs in underway, technically, it is impossible to ease furthermore.
（2）The negative interest policy does not guarantee whether to stimulate economy, in which the capital needs are domestically limited.
Even though, the BOJ has used the policy. Then, let’s think about how this monetary policy affect investments and investors.
First of all, the numbers of asset classes have reduced. The negative yields are already seen up to 10-year JGBs, which do not make sense to invest in the bonds. JGB is the safest investment instrument not only for institutional investors but also individual investors. As reported, the Ministry of Finance has announced that it stopped issuance of JGBs for individual investors this week
Also, some Money Management Funds, which is similar to MMF in the US, have stopped accepting subscriptions since Feb.1.
Then, Money Reserved Funds, which are cash equivalents in securities account, will not pay interest if they perform negatively.
While, banks still pay interest to the deposits, even if they cut it significantly. This is supported by the BOJ’s decision that does not apply negative interest to all deposit balance the banks leave in the current account of the BOJ. So, only a few interest will be paid for the time being.
Summarizing such situations, individual investors should think about the following facts when they invest.
（1）No safer investments exist anymore, except bank deposit.
（2）Take risks or not.
（3）Conservative investors should find middle-risk middle-return investments.
In addition, I believe that there will be a pressure to reduce sales charges and administration fees of investment trusts as the fees level are too expensive, compared to the negative interest rates in the market.
All in all, I hope “From deposit to investment” movement will appear again in this environment but all depends on Japanese mentality toward investments.
It is too early to judge people switch soon their risk-aversion minds on investment.
However, I strongly believe that we, both professionals and ordinary individual investors, have a great opportunity to try to invest in various investment products and instruments to make money. Like or not, we are in the midst of historic negative interest era.