Japan Is Selling Bonds Guaranteed To Lose You Money : The Two-Way With the global economy in turmoil, interest rates on some government debt are falling below zero.

Japan Is Selling Bonds Guaranteed To Lose You Money

Japan Is Selling Bonds Guaranteed To Lose You Money

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Pedestrians stand outside a securities firm in Tokyo Tuesday. Stocks plunged again in Japan, and the interest rate on the benchmark bond fell below zero. Eugene Hoshiko/AP hide caption

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Eugene Hoshiko/AP

Pedestrians stand outside a securities firm in Tokyo Tuesday. Stocks plunged again in Japan, and the interest rate on the benchmark bond fell below zero.

Eugene Hoshiko/AP

Japan is venturing further into the terra incognito of negative interest rates, selling a 10-year government bond that actually costs its purchasers money over time.

Japan is venturing further into the terra incognito of negative interest rates, selling a 10-year government bond that actually costs its purchasers money over time.

In doing so, it joins a handful of European countries that have also lowered rates below zero.

In doing so, Japan joins a handful of European countries that have also lowered rates below zero.

The yield on the 10-year note sold by the Bank of Japan dipped to an unprecedented level of negative .05 percent, meaning that anyone who buys it will lose money.

The yield on the 10-year note sold by the Bank of Japan dipped to an unprecedented level of negative .05 percent, meaning that anyone who buys it will lose money.

Like other central banks, the Bank of Japan has been steadily lowering interest rates for years in an effort to stimulate the country's economy. It cut rates so much that they eventually fell to zero.

But with global financial markets in turmoil, investors are evidently willing to pay a price for parking their money in an asset that is widely seen as very safe.

"We all thought that the zero lower bound was as low as things could go. That was as much stimulus as you could put into the economy," said David Blanchflower, professor of economics at Dartmouth and a former member of the Bank of England's Monetary Policy Committee, in an interview with NPR.

Like other central banks, the Bank of Japan has been steadily lowering interest rates for years in an effort to stimulate its economy. It cut rates so much that they eventually fell to zero, leaving the bank with no more ammunition

But over the past year, central banks in several wealthy countries, including Switzerland, Denmark and Sweden, have decided to experiment by pushing rates below zero. Blanchflower says they hoped this would lower the value of their currencies and make their exports more competitive:

When interest rates fell to zero, it was widely thought that

With global stock markets in turmoil, investors have been pouring money into safe havens such as the yen. That's sent the value of the yen rising against competing currencies such as the Euro, and made Japan's exports less competitive.

"I just think it's desperation, in the sense that you haven't got [many] weapons left. So what do you do? It's more of a case of, 'Well, let's try this and see, 'cause what else could we do? We've only got one club. We haven't got many weapons left.'"

Japanese officials are hoping that negative rates will lessen the pressure on the yen and stimulate growth.

"The hope is, and it's a big hope, that going to negative would help to add more stimulus to the economy, particularly as the world economy slows," said David Blanchflower, professor of economics at Darmouth and a former member of the Bank of England's Monetary Policy Committee.