IN FEBRUARY, the Bank of Japan (BOJ) adopted a negative nominal interest rate policy, and joined the European Central Bank (ECB), Denmark, Sweden and Switzerland as the only central banks to cut key interest rates below zero.

The BOJ started charging commercial banks a 0.1 per cent interest rate for new deposits. This means that rather than earning interest for depositing funds with the BOJ, banks instead have to pay interest for their new deposits.

In theory, such a policy should incentivise banks to extend more loans and refrain from hoarding cash. This should have a knock-on effect on economic growth; borrowing costs should come down, driving demand for loans and spurring economic activities. However, would negative interest rates be brilliant or disastrous for Japan's real estate?