While shrugging off growing market concerns that the Bank of Japan is reaching its limits after an already massive stimulus program, the bank’s Governor Haruhiko Kuroda signaled his readiness to ease monetary policy further using existing or new tools.
The BOJ head also affirmed that there would be no withdrawal of the monetary policy easing tools at the bank’s comprehensive assessment of its policies later this month.
In a sign that the central bank is becoming more mindful of the rising cost of its stimulus, public confidence in Japan's banking system would be hurt and financial intermediation may be impaired by the BOJ's negative interest rate policy, acknowledged Kuroda.
"Even within the current framework, there is ample room for further monetary easing ... and other new ideas should not be off the table. There may be a situation where drastic measures are warranted even though they could entail costs," he said, adding that the BOJ should "always prepare policy options," Kuroda told a seminar on Monday.
The BOJ has faced criticism from banks for squeezing already thin profit margins as the BOJ has gobbled up a third of Japan's bond market under its current framework that combines negative rates with hefty buying of government bonds and some riskier assets.
The BOJ will debate some of the unintended consequences of its ultra-loose policy and will consider making some modifications to its policy framework, reports Reuters citing sources with information about the matter.
In what is being called first time acknowledgment by the BOJ governor, Kuroda publicly said that negative rates could negatively impact the rate of returns on pension investments and hurt the banks’ profits and thereby could dampen public sentiment. But he stressed that the BOJ had room to deepen negative rates and said that monetary policy has yet to reach its limit.
"There is no free lunch for any policy. That said, we should not hesitate to go ahead with (additional easing) as long as it is necessary for Japan's economy as a whole," he said.
The BOJ has pledged to conduct a comprehensive assessment of the effects of its stimulus program at this month's rate review after it had eased policy in July.
With economic growth having ground to a halt and inflation sliding further away from its 2 percent target, most analysts expect the BOJ to ease further this month.
"Kuroda's message is that the BOJ would at least keep the option of deepening negative rates in case the yen spikes suddenly. But that doesn't mean it would take such a step anytime soon given concerns about the costs," said Yasunari Ueno, chief market economist at Mizuho Securities.
"As for the next step, I expect the BOJ to ease either by cutting rates or boosting quantitative easing, or a combination of both," Ueno added.
Since the BOJ implemented aggressive policy easing measures in 2013 under Kuroda, it has pushed back the timing of its inflation goal several times as it has been continuously facing stubbornly weak prices.
(Source:www.reuters.com)
The BOJ head also affirmed that there would be no withdrawal of the monetary policy easing tools at the bank’s comprehensive assessment of its policies later this month.
In a sign that the central bank is becoming more mindful of the rising cost of its stimulus, public confidence in Japan's banking system would be hurt and financial intermediation may be impaired by the BOJ's negative interest rate policy, acknowledged Kuroda.
"Even within the current framework, there is ample room for further monetary easing ... and other new ideas should not be off the table. There may be a situation where drastic measures are warranted even though they could entail costs," he said, adding that the BOJ should "always prepare policy options," Kuroda told a seminar on Monday.
The BOJ has faced criticism from banks for squeezing already thin profit margins as the BOJ has gobbled up a third of Japan's bond market under its current framework that combines negative rates with hefty buying of government bonds and some riskier assets.
The BOJ will debate some of the unintended consequences of its ultra-loose policy and will consider making some modifications to its policy framework, reports Reuters citing sources with information about the matter.
In what is being called first time acknowledgment by the BOJ governor, Kuroda publicly said that negative rates could negatively impact the rate of returns on pension investments and hurt the banks’ profits and thereby could dampen public sentiment. But he stressed that the BOJ had room to deepen negative rates and said that monetary policy has yet to reach its limit.
"There is no free lunch for any policy. That said, we should not hesitate to go ahead with (additional easing) as long as it is necessary for Japan's economy as a whole," he said.
The BOJ has pledged to conduct a comprehensive assessment of the effects of its stimulus program at this month's rate review after it had eased policy in July.
With economic growth having ground to a halt and inflation sliding further away from its 2 percent target, most analysts expect the BOJ to ease further this month.
"Kuroda's message is that the BOJ would at least keep the option of deepening negative rates in case the yen spikes suddenly. But that doesn't mean it would take such a step anytime soon given concerns about the costs," said Yasunari Ueno, chief market economist at Mizuho Securities.
"As for the next step, I expect the BOJ to ease either by cutting rates or boosting quantitative easing, or a combination of both," Ueno added.
Since the BOJ implemented aggressive policy easing measures in 2013 under Kuroda, it has pushed back the timing of its inflation goal several times as it has been continuously facing stubbornly weak prices.
(Source:www.reuters.com)
