What's going on?

Following Europe and the US, Japan�s central bank decided to do nothing at its meeting on Thursday � and that might say a lot about the limits of central banks� support for economies (in Japan and elsewhere).

What does this mean?

Back in February, the Bank of Japan instituted negative interest rates. The idea was that if banks have to pay for depositing money with the central bank, then that would lead them to lend more money to people and businesses. This was supposed to encourage spending that would boost the economy.

Low interest rates typically lead to a weaker currency. So the hope was probably that the Yen would weaken, and it would be easier for Japanese companies to sell their goods overseas – but the opposite occurred. By standing pat on Thursday, rather than sending interest rates even further into negative territory, the Bank of Japan is perhaps tacitly admitting that their policy is just not working.

Why should I care?

The bigger picture: Investors that have lost confidence in central banks are pushing for new ideas. Increasingly, analysts are claiming that higher interest rates would actually stimulate economic growth (note: that is not a consensus opinion). Another idea, as we�ve reported before, is for governments to directly spend more money (on things like airports and railways, a.k.a. infrastructure). Others speculate that it won�t be long until central banks literally put money directly in your bank account (don�t get your hopes up � that would probably mean things have gotten a lot worse�).

For markets: Low growth typically isn�t good for stocks. Ultimately, a company is worth the profit it makes or the future profit investors think it will generate. And profits are a lot easier to come by when an economy is growing. Stock markets tend to move around a lot more than the economy (due to short-term factors and investor behavior), but over time, the two almost always move in the same direction. �