Bank of Japan not engaging in currency war with negative rates, says Kuroda

A pedestrian holding an umbrella walks past the Bank of Japan (BOJ) headquarters in Tokyo.
A pedestrian holding an umbrella walks past the Bank of Japan (BOJ) headquarters in Tokyo. PHOTO: BLOOMBERG

TOKYO (REUTERS) - Bank of Japan governor Haruhiko Kuroda said the central bank was not engaging in a currency war by adopting negative interest rates, stressing that the move was aimed at stimulating the economy through lower borrowing costs.

He also reiterated the BOJ's determination to push interest rates deeper into negative territory or boost asset purchases further if risks threaten to delay achievement of its 2 per cent inflation target.

"As with the Federal Reserve, the European Central Bank or any other major central bank, the BOJ doesn't target exchange rates in guiding monetary policy," Mr Kuroda told parliament on Thursday (Feb 4). "By pushing down interest rates and the yield curve, we hope to push down real interest rates so that we can stimulate consumption and investment," he said.

The BOJ cut a benchmark interest rate below zero on Friday, stunning investors with another bold move to stimulate the economy as volatile markets and slowing global growth threaten its efforts to beat deflation.

The shock decision was seen by many analysts as an attempt to prevent the yen from appreciating, as the safe-haven currency had soared to a one-year peak against the US dollar last month in the face of widespread risk aversion.

The dollar hit a 6-week high of 121.70 yen immediately after the decision, but handed back all the gains to hover around 118 yen on Thursday.

Mr Kuroda shrugged off the view that the BOJ's latest easing was aimed at weakening the yen, adding that no major central bank would engage in competitive currency devaluation.

"If anyone thinks major central banks guide policy (to engage in a currency war), that would be a misunderstanding," he said.