Toru Fujioka
The
nation’s financial markets would have been in worse shape if the Bank
of Japan had not adopted a negative interest rate, said Governor
Haruhiko Kuroda, rejecting suggestions the new policy has been
counterproductive.
“I really don’t think that the introduction of the
negative interest rate backfired or caused the yen to appreciate and
stock markets to decline in Japan,” Kuroda said during a question and
answer session at Columbia University in New York. “If anything, I can
say that if we didn’t introduce the QQE with the negative interest rate,
financial markets in Japan would have been even worse.”
The yen has rallied almost 11 percent since Jan. 29, when
the BOJ announced it would charge financial institutions for a portion
of the funds that they park at the central bank. The benchmark Topix
stock gauge has fallen 5 percent while the banking index has plunged 15
percent. Although BOJ policy has been the subject for debate among
investors, weaker global growth, changes to the outlook for U.S.
interest-rate hikes and uncertainties in China and emerging markets have
all been influential.
Inflation Target
Kuroda, who is in the U.S. for spring meetings with the
International Monetary Fund and talks with colleagues from Group of 20
nations, reaffirmed his belief that his monetary policy is having its
intended effects and will in time spur inflation to a 2 percent target.
The BOJ will add to stimulus without hesitation if needed,
he said.
The governor also reiterated that the BOJ isn’t targeting currency markets with its policies.
It isn’t correct to consider the negative rate as a tax on
banks or the use of money, said Kuroda. The governor added that the
policy won’t cut profits at banks excessively, and ultimately will help
them when it contributes to inflation in Japan.
Responding to concern that the BOJ may run out of bonds to
buy to continue its monetary expansion program, Kuroda said he sees no
obstacles now. Some 60 percent or 70 percent of Japanese government
bonds are still potentially available for the central bank to purchase,
he said.
Corporate Critic
The negative rate policy is fueling anxiety among households
and companies and prolonging it may weaken financial institutions,
Mitsubishi UFJ Financial Group President Nobuyuki Hirano said in a
speech in Tokyo.
“Both households and businesses have become skeptical about
the effectiveness of policy measures to address the current economic
problems,” Hirano said, adding that Japan hasn’t been able to completely
leave deflation behind.
Bank of Japan Executive Director Masayoshi Amamiya, speaking in Tokyo,
said the BOJ still needs to closely monitor the impact of the negative rate on financial markets.
“It is important to consider whether there are any measures
that should be taken by the market as a whole so that the market is able
to adapt to changes and function properly,” he said. The BOJ wants to
support discussions that contribute to the enhancement of the robustness
of the financial markets, he said.
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