BoJ chief de­fends neg­a­tive rates

The Pak Banker - - FRONT PAGE -

Ja­pan's cen­tral bank gov­er­nor on Thurs­day said the bank's adop­tion of neg­a­tive in­ter­est rates was not di­rectly aimed at weak­en­ing the yen, dis­miss­ing wider crit­i­cism that the pol­icy was a fail­ure amid a surge in the lo­cal cur­rency.

The Bank of Ja­pan stunned mar­kets by de­ploy­ing neg­a­tive in­ter­est rates last month to pre­vent fi­nan­cial mar­ket volatil­ity from hurt­ing busi­ness con­fi­dence and de­lay­ing an exit from de­fla­tion. The move, how­ever, has failed to over­ride a wave of global risk-aver­sion that has sent global stock mar­kets into a slump and bol­stered ap­petite for the safe-haven yen.

BoJ Gov­er­nor Haruhiko Kuroda said pol­icy ob­jec­tives around price and cur­rency sta­bil­ity were not the same thing in large economies like Ja­pan. He also blamed per­sis­tent mar­ket volatil­ity on in­vestors' con­cerns over China's slow­down, slump­ing oil prices and bank­ing-sec­tor woes in Europe.

"Global mar­ket jit­ters have not yet sub­sided," Kuroda told an up­per house fi­nan­cial com­mit­tee meet­ing on Thurs­day.

He said in smaller economies like Den­mark and Switzer­land - where the trade to GDP ra­tio is com­par­a­tively higher - neg­a­tive rates work more di­rectly in weak­en­ing their cur­ren­cies. This means achiev­ing price sta­bil­ity and cur­rency sta­bil­ity is roughly the same thing, he said.

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