Although a controversial negative rate policy has so far failed to encourage any real economic expansion or inflation, Bank of Japan (BOJ) Governor, Haruhiko Kuroda, has announced that the central bank could be willing to cut rates even further.
Kuroda was quoted in an interview with Sankei newspaper saying that rates have not reached their basement levels yet.
“If we look at the action by the U.S. Federal Reserve and the ECB [European Central Bank] they have gone much lower than we have with their rates so we cannot rule out expansion of the policy,” he said.
There were more than a few raised eyebrows at the start of the year when the BOJ set a minus 0.1 rate for certain deposits in their vaults in the hope that the move would encourage banks and corporations to increase expenditure and spur inflation, but that has not materialized.
The bank will carry out a full assessment of its annual fiscal policies next month, and only then will they make a decision on whether to adjust their huge asset purchasing plan, which has seen them buy up over 90 trillion yens worth of bonds on a yearly basis.
“Despite all this easing of the monetary base we haven’t seen any solid results,” said Michael Lane - Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in an email to investors.
“It’s been going on now for about 3 years and Prime Minister Abe is starting to get called out on his failed policies. The aim is to get up to 2 percent on inflation but the level hasn’t budged, with the economy as stagnant as ever,” Lane added.
The financial world will know more when the BOJ release their annual report on the same day as their meeting next month.
