Kuroda says limits to how deeply rates can go negative

OSAKA: Bank of Japan (BoJ) governor Haruhiko Kuroda said there were limits to how much central banks can deepen negative interest rates, highlighting the need to maintain the BoJ’s current ultra-loose policy to continue pushing up inflation.

He also warned that North Korea posed a risk to an otherwise brightening global economic outlook, stressing that the central bank was closely monitoring the impact of escalating tensions on the Korean peninsula on markets and Japan’s economy.

“Our main scenario is for global growth to accelerate moderately. But we’ll continue to closely watch how developments in North Korea could affect markets and Japan’s economy,” Kuroda said in a meeting with business leaders here.

“The BoJ is ready to take appropriate action as needed,” he said without elaborating on specific measures.

As with other central banks, the BoJ’s first line of defence against major economic and market shocks would be to offer unlimited amounts of liquidity via market operations.

Under a policy framework adopted last year, the BoJ guides shortterm interest rates at minus 0.1% and 10-year government bond yields around 0%.

Asked how much room central banks have left in deepening negative rates, Kuroda said none of the central banks that adopt negative rates sets their policy rate deeply in minus territory

Kuroda repeated that it was ”premature” to unwind the BoJ’s stimulus programme or debate an exit from its ultra-easy policy. — Reuters