Around the turn of the century, wholesale and consumer prices fell in Japan. In 2002, for example, consumer prices fell by 0.4 percent. Short-term interest rates averaged around 0.1 percent. Assuming that the 0.4 percent decrease in the price level was anticipated in Japan, the real interest rate was at 0.5 percent. The real interest rate equals the nominal interest rate minus the expected inflation rate (0.1 - -0.4) = (0.1 + 0.4) = 0.5. Why can’t nominal interest rates be negative?