Size of excess reserves may determine success of BOJ's negative interest rate shock

Tokyo

NOW that the Bank of Japan (BOJ) has "thrown down the gauntlet" once again, this week is expected to be a critical time when markets test the resolve of the Japanese and other central banks to go on flooding their economies with money in order to reverse deflationary trends and get global growth moving up again.

The positive impact on stock and bond markets of last Friday's shock move by the BOJ to introduce negative interest rates could quickly fizzle as markets overcome their initial surprise at the move, some analysts claim.

But sources close to the Japanese central bank suggest that the potential "shock and awe" impact of the BOJ's move could prove greater than expected bec…