BoJ's negative interest rate: how it works

The Bank of Japan on Friday adopted a negative interest rate policy to spur lending and help drive inflation towards its two-percent target. The -0.1 percent interest rate introduced by the BoJ means that banks parking their money with the central bank are actually charged for doing so. By penalising the banks for hoarding their cash, the BoJ is giving them the incentive to loan the money out, thereby pumping more cash into the economy and, hopefully, boosting economic activity.