Many BOJ Policymakers Worried over Negative Rate Policy: Transcripts

Tokyo, July 15 (Jiji Press)–Many Bank of Japan policymakers voiced concerns about potential side effects of a negative interest rate policy at the central bank’s monetary policy meeting in January 2016, at which its introduction was decided, according to transcripts of the meeting released Wednesday. The BOJ’s Policy Board voted five to four to adopt the policy at the Jan. 28-29, 2016, meeting. The central bank, then led by Governor Haruhiko Kuroda, was struggling to achieve its 2 pct inflation target at the time. In January 2016, crude oil prices dropped while concerns grew over a slowdown of the Chinese economy. Under the circumstances, Japanese stock prices fell and the yen rose. Under its unprecedented monetary easing regime introduced in April 2013, the Kuroda-led BOJ purchased large amounts of financial assets, such as Japanese government bonds. But the ultraeasy policy failed to produce intended effects in realizing stable price growth. At the January 2016 policy meeting, the board also decided to push back the target of achieving the 2 pct inflation to the first half of fiscal 2017 from the second half of fiscal 2016. Under the negative rate policy, put in place in February 2016, an interest rate of minus 0.1 pct was applied to part of commercial banks’ current account deposits at the BOJ, in order to encourage them to use their funds for loans to companies rather than depositing the money at the central bank. According to the transcripts, Kuroda explained that the negative rate policy would “further strengthen” the effects of the BOJ’s ultraeasy regime. Then BOJ Deputy Governor Hiroshi Nakaso also stressed the need for the negative rate policy, citing the “growing risk” of a decline in companies’ willingness to raise wages “adversely affecting the underlying trend of prices.” END [Copyright The Jiji Press, Ltd.]