Rejoinder to Mr. Miyao's Comment on "Two Japanese Banks Lower an Interest Rate"

Ken Belson (New York Times, Tokyo)

To: Mr. Miyao

Thank you for reading my story on interest rates from March 30th
(http://query.nytimes.com/search/abstract?res=F30D12FE3D5E0C738FDDAA0894DA404482). I read your comment on the GLOCOM home page (http://www.glocom.org/debates/200204_miyao_com/index.html).

I agree with your point -- real interest rates are positive, so the nominal rate of 0.001 percent on some accounts is partly facetious. I wrote that in the story in paragraph 7: because of deflation "... money left in a bank account gains purchasing power over time here even without earning interest."

My larger point, though, is that deflation is eroding people's expectations for the future, and that has negative consequences for the economy at large. The 0.001 percent interest rate is really just a symbol of that.

Anyway, many thanks for reading.

All the best,

Ken Belson