How does Japans zero-interest rate work? -

I realize it s around 1/2 a percent or so now, but does that mean that loans are given at say 1% interest and people get next to nothing for depositing money with the bank? Furthermore, won t it be profitable to take a loan from Japan and then use that money to invest in even fixed deposits in any other country?

But then you d be taking the foreign exchange rate risk when you had to convert back to Yen to repay the loan. If the Yen suddenly appreciated (so your foreign currency bought less Yen at the time for the repayment of the loan) then you d lose. What would be a neat trick would be to borrow in Yen, convert it to an investment in a foreign fixed deposit and be able buy a hedge to hedge out the foreign exchange rate risk and the credit risk of whereever you put the deposit, ie. the risk of non-repayment of the deposit. If you could do all this and still make a profit, I d be seriously impressed. If I thought about it I could probably think of a bunch of other risks to be considered in such a structure. There are ceratinly a bunch of incidental costs involved that would also decrease the return, for example the bid-offer spread on the conversion of Yen on the way out of Yen and on the way in again.