BoJ just announced its negative interest rate policy in an effort to drag Japanese out of a deflationary mindset and hoping to shift the demand curve to boost the economy. However, my question is, if people don't want to spend, why bother?
Consider the following simple model of an ideal economy. Suppose this economy has a maxium output is 100 units of bread. Further suppose it is a one-factor economy, i.e. all output is produced by labor. Suppose everyone in the country is considered a labor and there is a total of 100 units of labor in the economy. Suppose the most comfortable level of consumption of bread by people is a total of 10 units. Then my question is why would the cnetral banks impose policies to force people to demand more of it when they do not want to? It only made sense under the following circumstance: since only 10 units of bread is needed, maybe only 10 units of labor is employed to do all the production and the rest of the people is not employed, which means they do not have any money to buy the bread. In this case, it made sense for government to raise demand so the rest of the people can have a job and earn money, and therefore spend money, which further helps the economy. However, in Japan's case, unemployment rate looks fine, around $3.5\%$ as I checked yesterday, partly because Japanese companies are reluctant in cutting employees. Connecting to the simple model I had beforehand, Japan's case is like having all the 100 units of labor employed to produce 10 units of bread, althought they really only needed 10 units of labor. This implies that all the people are getting what they want.
So why is there anything to worry about that the central bank of Japan even start to adopt these agressive monetary policies?