Bank of Japan chief says no plan to adopt negative rates now

Bank of Japan (BOJ) governor Haruhiko Kuroda at the BOJ headquarters in Tokyo, on Oct 30, 2015.
Bank of Japan (BOJ) governor Haruhiko Kuroda at the BOJ headquarters in Tokyo, on Oct 30, 2015. PHOTO: REUTERS

TOKYO (REUTERS) - Bank of Japan governor Haruhiko Kuroda said he is not thinking of adopting a negative interest rate policy now, signalling that any further monetary easing will likely take the form of an expansion of its current massive asset-buying programme.

"There are pros and cons of adopting negative interest rates ... The Federal Reserve didn't adopt negative interest rates and yet, its policy succeeded in stimulating the US economy," he told parliament on Thursday (Jan 21).

Speculation is growing in markets that the BOJ may expand stimulus as early as its rate review next week, as slumping oil costs push inflation further away from its 2 per cent target and global stock market falls dampen business confidence.

However, Mr Kuroda has maintained his optimism on Japan's economy, saying that it continues to recover moderately and is helping keep inflation on a broad uptrend.

But he identified the recent global market rout as among risks to Japan's economic outlook, stressing the central bank's readiness to expand monetary stimulus if needed to ensure achievement of its 2 percent inflation target.

"We'll continue to watch carefully how recent market moves could affect Japan's economy and prices," Mr Kuroda said.

The BOJ has kept monetary policy steady since expanding its massive stimulus programme in October 2014. But slumping oil prices and soft household spending have pushed core consumer inflation to almost zero, keeping the bank under pressure to do more to achieve its 2 per cent inflation target.

The central bank is set to cut its rosy inflation forecasts at its rate review next week, although it is uncertain whether Mr Kuroda will opt to deploy a fresh round of stimulus.