The Bank of Japan style today's further policy easing as
The Introduction of "Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate"
A diagram is helpful in understanding the new negative interest rate regime:
What it means:
A bank's account will be split into 3 "tiers"
- An interest rate of 0.1% applies to existing balances
- A rate of zero will apply applies to required reserves
- A negative rate will be applied to account holding in excess of these above amounts, the 'current account'. This -0.1% rate will be cut further if the BOJ deems it necessary.
(h/t to LiveSquawk for the summary)
That's the gist of how the negative rate will apply
Or straight from the horse's mouth:
the outstanding balance of each financial institution's current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively.
