Bank of Japan does not except reducing of already negative interest rates

Bank of Japan does not except reducing of the already negative interest rates, despite that the controversial policy failed to stimulate inflation or economic growth, according to the Governor of the Bank Haruhiko Kuroda. BoJ stunned markets in January when imposed interest rates of -0.1% for some deposits that banks provide to the central bank, which measure came into force in February. However, according to Haruhiko Kuroda, the central bank policy regarding negative interest rates has not reached its limits.

“The decrease of negative interest rates, introduced by European central banks, is higher than those in Japan. From a technical perspective, there is options for further reduction”, said Governor of Bank of Japan.

The regulator considered that switching to negative interest rates will encourage banks to lend more, stimulating higher costs and inflation. Unfortunately this did not happened. The central bank is also considering whether to make any changes in its major quantitative easing program at worth of 80 trillion JPY per year, after an overall assessment of monetary policy in September. Assets purchasing is a key driver of the program of the central bank, which was launched in 2013 and targeted inflation of 2%. Despite aggressive incentives, inflation is away from the target and the growth remains anemic.

The central bank plans to publish the result of its assessment on the day of its meeting on September 20-21.

At its last meeting in late July, BoJ expand their purchases of exchange-traded funds (ETF) and double the size of its program of loans in dollars, but refrained from expansion of the program to buy government bonds. The majority of economists expect more measures from the Bank of Japan, due to low expectations for inflation and weak growth.

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