TEXT OF STORY

KAI RYSSDAL: What if money were free. You’d go to your bank, borrow say a thousand dollars, and pay ’em back a thousand dollars. Interest rates here in the US have been on the rise for a while now. But in Japan the official cost of money has been virtually 0 percent. For six years. The Bank of Japan is meeting today to talk about a rate hike. It’s probably going to be a small one. But Steve Herman reports from Tokyo even that could have a big effect.

STEVE HERMAN: The itty bitty hike may not seem much to folks in the United States where interest rates are around 5.25 percent. But Japanese politicians, facing elections in September, see reason for the Japanese to cheer, though the cheering section may be small.

HIROMICHI SHIRAKAWA: They’re thinking of campaigning to small depositors that “You’re money will get some interest.”

That’s Former central bank official Hiromichi Shirakawa.

SHIRAKAWA: Even demand deposits would have some interest rates, which is maybe 0.1 percent, instead of 0.002-something.

But Martin Schulz at the Fujitsu Research Institute says it’s a tricky move the Bank of Japan must make. Raising the rates signals that the world’s second largest economy is feeling economically more self-confident and ready for business.

With a rate hike, Japanese may be tempted to keep more of their money at home, instead of investing in foreign currency.

MARTIN SCHULZ: Japanese investors might invest more in Japan. That would have an impact in terms of more yen returning or not leaving.

A rate hike, however miniscule, would put Japan on a credit-tightening cycle along with central banks in the United States and Europe.

But Japan also wants to avoid the mistake it made in 2000 when it lifted rates prematurely and effectively shut down a delicate recovery.

In Tokyo, I’m Steve Herman for Marketplace.