Japan Is Not Alone: Which Countries Still Have Very Low Interest Rates?

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Japan is often treated as the world’s most famous low-interest-rate economy. However, Japan is not alone. Switzerland, Thailand, Sweden, Denmark, the euro area and China are also operating with relatively low interest rates, although the reasons behind their policies are very different.

As of August 28, 2026, the Swiss National Bank’s policy rate stood at 0%, while Thailand’s policy rate was 1%. The Bank of Japan was guiding its overnight call rate at around 1%. Sweden’s policy rate was 1.75%, the European Central Bank’s deposit facility rate was 2.25%, and China’s one-year loan prime rate was 3%. These figures should not be treated as a perfect global ranking because each central bank uses a different policy instrument.

The more important question is not simply which country has the lowest rate. It is why the rate is low, whether the policy is temporary or structural, and what the situation means for currencies, banks, households and investors.

Low Interest Rates Do Not Necessarily Mean a Weak Currency

Before comparing countries, it is important to separate interest rates from exchange rates.

An interest rate is the cost of borrowing money. An exchange rate is the price of one currency relative to another currency. A country can have very low interest rates and a strong currency at the same time.

Switzerland is the clearest example. The Swiss National Bank has kept its policy rate at 0%, but it has also warned about the risk of excessive appreciation in the Swiss franc. If necessary, the central bank has indicated that it is willing to intervene in foreign-exchange markets to prevent the franc from becoming too strong. This means Switzerland has low interest rates without having a weak currency.

Thailand provides another example of why the two concepts should not be confused. The Bank of Thailand reported that the baht appreciated against the U.S. dollar during the first quarter of 2026 before depreciating later as external risks and energy costs changed. The direction of the baht was influenced by the U.S. dollar, geopolitical developments, oil imports and capital flows, not simply by Thailand’s low policy rate.

Switzerland: Zero Rates Because of the Strong Franc

Switzerland currently has one of the lowest official interest rates among major economies. The Swiss National Bank left its policy rate at 0% in June 2026 and projected average inflation of only 0.6% for 2026, 2027 and 2028. It also expected economic growth of around 1% in 2026 and 1.5% in 2027.

At first glance, Switzerland may appear similar to Japan because both countries have low inflation and low interest rates. However, the underlying economic conditions are quite different.

Switzerland’s low-rate policy is partly designed to prevent the franc from appreciating too quickly. The franc is viewed as a safe-haven currency, meaning investors often buy it during periods of geopolitical or financial uncertainty. A stronger franc reduces the cost of imported goods, but it can also make Swiss exports more expensive for foreign buyers.

The Swiss case is therefore less about a permanently weak economy and more about managing the side effects of a strong currency and very low inflation. In practical terms, Switzerland shows that a zero-interest-rate policy does not automatically signal economic collapse or currency weakness.

Thailand: The Emerging-Market Version of Japanification?

Thailand is perhaps the country outside Japan that most closely raises concerns about Japanification. The Bank of Thailand kept its policy rate at 1% on August 26, 2026, saying that economic growth remained low and uneven. The central bank also noted that household spending was cautious, small and medium-sized business loans were still contracting, and banks remained careful when lending to vulnerable borrowers.

Thailand’s problem is that low borrowing costs have not produced strong credit demand. Households are already carrying significant debt, while banks are becoming more selective. The International Monetary Fund reported that Thailand’s household debt was equivalent to 86.8% of GDP at the end of September 2025, while private credit growth remained weak.

Demographics add another layer of pressure. Official research from the Bank of Thailand said that people aged 60 and above represented around 20% of Thailand’s population in 2024. The country is expected to move toward a super-aged society within the next decade, while the working-age population declines.

This combination creates a difficult economic environment. Older populations generally reduce demand for housing, education and other forms of household borrowing. High debt makes consumers more cautious, while weak productivity limits the willingness of businesses to invest.

Thailand is not Japan, however. Thailand remains an emerging market with greater currency volatility, higher risk premiums and more sensitivity to foreign capital flows. This limits how far the Bank of Thailand can cut rates without creating pressure on the baht or increasing imported inflation. The result is a low-rate economy, but not necessarily a safe low-rate economy.

Japan remains a benchmark for low interest rates, but its monetary policy is gradually changing. On July 31, 2026, the Bank of Japan guided the overnight call rate to around 1%. The central bank also indicated that it would continue adjusting monetary accommodation in response to economic activity, inflation and financial conditions.

That is an important change from the period when Japan maintained negative interest rates or near-zero borrowing costs for many years. Japan is still operating with a very low rate compared with many other economies, but it is no longer the only country with exceptionally cheap money. Switzerland now has a lower nominal policy rate, while Thailand is operating at a similar level.

Japan’s experience remains significant because it demonstrates how difficult it can be to escape a low-rate environment once aging, weak demand and low inflation become entrenched. The current policy shift suggests that Japan is attempting to move away from that cycle, but the success of the transition will depend on wage growth, consumer demand and whether inflation remains sustainable.

Japan: Still Low, but No Longer the Only Example

Sweden: A Cyclical Low-Rate Economy

Sweden is another country with relatively low interest rates, but its situation is different from Thailand and Japan.

The Riksbank left its policy rate at 1.75% in August 2026. The central bank said that inflation remained low and unemployment was high, while economic growth and sentiment had improved. At the same time, it warned that the probability of a rate increase later in the year remained.

This suggests that Sweden’s low rate is more cyclical than structural. The central bank is supporting an economy with weak employment and subdued inflation, but it is not necessarily preparing for decades of stagnation.

Sweden therefore represents an important distinction. A country can have low rates because of a temporary economic slowdown, rather than because of permanently weak demographics or a long-term collapse in demand. If growth and inflation recover, Swedish rates could rise again relatively quickly.

Denmark and the Euro Area: Rates Shaped by Monetary Arrangements

Denmark offers a different example because its monetary policy is closely linked to the euro area. Danmarks Nationalbank raised its certificate-of-deposit and current-account rates to 1.85% in June 2026 after the European Central Bank raised its deposit facility rate. The Danish central bank said the move preserved the interest-rate spread relative to the euro area.

This means Denmark’s interest rates are not determined entirely by domestic economic conditions. Exchange-rate stability and the relationship with the euro play an important role.

The euro area itself also has relatively low rates compared with the levels seen during the inflation surge after the pandemic. In July 2026, the ECB left its deposit facility rate at 2.25%, while keeping its main refinancing rate at 2.40% and its marginal lending facility at 2.65%. The ECB said future decisions would depend on inflation, energy prices and incoming economic data.

However, the euro area should not be treated as a single economy. Germany, Italy, Spain and smaller member states can have very different growth, debt and housing-market conditions even though they share the same central-bank interest rate.

China is also operating with relatively low borrowing benchmarks, although its system is not directly comparable with Japan, Switzerland or Sweden.

On August 20, 2026, China’s one-year loan prime rate was 3%, while the five-year LPR was 3.5%. The one-year LPR is widely used as a benchmark for business lending, while the five-year rate influences many mortgage loans.

China’s low lending rates are linked to an effort to reduce financing costs and support economic activity during a period of weaker consumption and investment momentum. Official data cited by China’s government showed that the economy grew 4.7% year over year during the first half of 2026, but the same report noted that consumption and investment momentum had moderated.

China is not yet a classic zero-rate economy. Its policy challenge is better described as a structural transition involving property-market weakness, changing investment patterns and efforts to shift growth toward technology and higher-value manufacturing.

The key risk is that lower lending rates may not be enough if households and companies are unwilling to borrow. As in Thailand, the transmission of monetary policy depends on confidence, asset prices and expectations about future income.

China: Low Lending Rates During a Structural Transition

What These Countries Have in Common

The common feature among these economies is that interest rates are being kept low because demand is not strong enough, inflation is subdued, the currency needs to be managed or policymakers are trying to support a difficult transition.

But the countries should not be placed in the same category. Switzerland has very low rates alongside a strong safe-haven currency. Thailand combines low rates with high household debt, aging demographics and emerging-market risks. Sweden is using low rates to support a cyclical recovery. Denmark’s rates are heavily influenced by its relationship with the euro. China is using lower lending benchmarks during a structural economic transformation. Japan remains the most established example of long-term low-rate conditions, although it is now moving gradually toward normalization.

For investors, the headline policy rate is only the starting point. The more important questions are whether the rate is below inflation, whether credit demand is recovering, whether banks are willing to lend and whether the currency is strengthening or weakening.

A low interest rate can support asset prices and reduce borrowing costs, but it can also signal weak growth, fragile banks or poor investment demand. In some countries, the biggest risk may be currency depreciation. In others, the greater risk may be that a strong currency creates deflationary pressure.

The main conclusion is clear: Japan is not alone in having low interest rates, but Japan is no longer the only model investors should study. Switzerland, Thailand, Sweden, Denmark and China demonstrate that similar interest-rate levels can reflect completely different economic realities.

©2026 Ryan Financial Daily