While addressing a Business Group today, BOJ Governor Mr. H. Kuroda said that the central bank will scrutinize the impact of negative rate policy on money markets.
Key Quotes:
Wants to dispel concerns that QQE cannot be expanded further
Cannot deny that QQE with negative rate has an adverse effect on financial institutions’ earnings
Aim of QQE with negative rate is to benefit households, firms and ultimately to fully overcome deflation
By making full use of QQE with negative rate, BOJ will achieve 2 pct inflation at earliest possible time
Deflation will not return, 2 pct inflation target will definitely be achieved
Negative rates offer big benefits to individuals and corporates
Decline in lending rates is clearly larger than decline in savings deposit rates
Low interest rate environment will hurt bank earnings over long run
Additional comments from Kuroda via Reuters:
Japan banks are very healthy, have solid capital base
Decline in yen interest rates and fact further easing is possible have positive impact on asset prices
Japan banks still able to secure high earnings due to econ recovery
Current policy has effect of raising stock prices, lowering yen but these effects now being outweighed by excessive risk aversion
Fundamentals of Japan’s economy and Japanese firms remain strong
Given competition to extend loans, it is difficult for Japan banks to raise lending costs
Escaping deflation is the only way to improve banks’ earnings
Decline in Chinese stock prices can be seen as correction of bubble rather than sudden deterioration in China’s fundamentals
(Market News Provided by FXstreet)