Japan Starts Negative Interest Rates to Boost Economy

The Bank of Japan on Friday said it will charge lenders that leave too much cash on idle deposit with it, introducing a negative interest rate policy for the first time as it seeks to shore up a stumbling economic recovery.

The surprise move rattled stock market investors, with the Nikkei 225 index swinging between gains and losses after the announcement. It closed 2.8 percent higher. The Japanese yen slid, with the U.S. dollar rising to about 120.70 yen from about 118.50 earlier in the day.

The central bank said it is imposing a 0.1 percent fee on some new commercial bank deposits with the BOJ, effectively a negative interest rate. It hopes that will encourage commercial banks to lend more, rather than keeping cash at the BOJ, and stimulate investment and growth in the world's third-largest economy.

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