BOJ's Kuroda says room for more easing, including new ideas

Mon Sep 5, 2016 12:13am EDT
 
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By Leika Kihara

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda signaled his readiness to ease monetary policy further using existing or new tools, shrugging off growing market concerns that the bank is reaching its limits after an already massive stimulus program.

He also stressed the BOJ's comprehensive assessment of its policies later this month won't lead to a withdrawal of easing.

But Kuroda acknowledged that the BOJ's negative interest rate policy may impair financial intermediation and hurt public confidence in Japan's banking system, a sign the central bank is becoming more mindful of the rising cost of its stimulus.

"Even within the current framework, there is ample room for further monetary easing ... and other new ideas should not be off the table," Kuroda told a seminar on Monday.

"There may be a situation where drastic measures are warranted even though they could entail costs," he said, adding that the BOJ should "always prepare policy options."

Under its current framework that combines negative rates with hefty buying of government bonds and some riskier assets, the BOJ has gobbled up a third of Japan's bond market and faced criticism from banks for squeezing already thin profit margins.

Sources have told Reuters the BOJ will consider making some modifications to its policy framework and debate some of the unintended consequences of its ultra-loose policy.

For the first time, Kuroda publicly acknowledged that negative rates could dampen public sentiment by hurting banks' profits and the rate of returns on pension investments.   Continued...

 
Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo, Japan, July 29, 2016. REUTERS/Kim Kyung-Hoon