BOJ chief prepared to cut rates further if needed

Mr Kuroda yesterday said he remained open to devising new means to revive the economy if existing tools did not work.
Mr Kuroda yesterday said he remained open to devising new means to revive the economy if existing tools did not work. PHOTO: BLOOMBERG

TOKYO • Bank of Japan (BOJ) governor Haruhiko Kuroda yesterday said there is more room to expand stimulus further to reach its 2 per cent inflation target, signalling his readiness to cut interest rates deeper into negative territory.

Speaking at a seminar, Mr Kuroda said he remained open to devising new means to revive Japan's economy if existing tools did not work.

The central bank stunned investors last Friday by unexpectedly cutting a benchmark interest rate below zero in what Mr Kuroda described as "the most powerful monetary policy framework in the history of modern central banking".

"If we judge that existing measures in the toolkit are not enough to achieve (our) goal, what we have to do is to devise new tools," he said at the seminar. "I am convinced that there is no limit to measures for monetary easing."

The speech came hours after BOJ released the minutes of its December meeting, in which it reportedly had an intense debate on the feasibility of adopting supplementary steps for its massive stimulus programme even while agreeing that the broad price trend was improving steadily.

ENDLESS POSSIBILITIES

I am convinced that there is no limit to measures for monetary easing.

MR HARUHIKO KURODA, Bank of Japan governor

At its most recent policy meeting last week, the BOJ decided it will charge a 0.1 per cent interest on some of the excess reserves financial institutions park with it, while maintaining its asset-buying programme - dubbed "quantitative and qualitative easing".

The central bank has justified the move as a way to fight deflation in a country which has been grappling with slumping household spending and business outlook.

But the move has also driven down the value of the yen and raised the price of financial assets.

The currency was trading at 120 per US dollar, below a six-week high of 121.70 yen before the negative interest rate decision.

Yesterday, the BOJ chief said that although Japan's economy was recovering moderately, it was taking longer than expected to achieve his 2 per cent inflation target due to slumping energy costs.

While offering few clues on the trigger for further monetary easing, Mr Kuroda said the recent global markets rout and slowing emerging economies could hurt Japanese business sentiment and discourage firms from boosting wages.

"What's important is how (such external risks) could affect confidence," he said.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 04, 2016, with the headline 'BOJ chief prepared to cut rates further if needed'. Print Edition | Subscribe