The Bank of Japan will not rule out deepening a cut to negative rates it introduced in February, the Sankei newspaper quoted Governor Haruhiko Kuroda as saying, even as the controversial policy has failed to spur inflation or economic growth.
In an interview with the daily, Kuroda said the BOJ’s negative rate policy has not reached its limits.
“The degree of negative rates introduced by European central banks is bigger than Japan. Technically there definitely is room for a further cut,” Kuroda told the Sankei.
The BOJ stunned markets in January when it set a minus 0.1 percent rate on some deposits that banks place at the central bank, with the move taking effect from February.
While the BOJ hoped the shift to negative rates would encourage banks to lend more, spurring higher spending and inflation, none of that has happened as yet.
The BOJ will also consider whether to make any changes to the 80 trillion yen ($798 billion) per year massive asset-purchase plan once the outcome of a comprehensive assessment of its monetary policies is out in September, Kuroda said.
The asset purchases are a key plank of the central bank’s “quantitative and qualitative easing” program deployed in 2013, aimed at achieving its 2 percent inflation target. Despite the aggressive easings, however, inflation is well off the target and growth remains anemic.
Kuroda told the daily the BOJ plans to release the outcome of the assessment on the day of the policy meeting in September.