Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Monday the central bank will scrutinize the effects of negative interest rates on the economy for the time being, suggesting that no immediate expansion of stimulus was forthcoming.
He also maintained his optimism on Japan’s economic outlook, countering criticism that the BOJ’s decision in January to adopt negative rates has had little positive effect on markets.
“The decline in yen interest rates and the fact that further monetary easing is possible – all else being equal – have a positive impact on asset prices,” Kuroda said at a seminar.
“At the moment, these effects are being outweighed by excessive risk aversion among investors around the globe.”
Kuroda reiterated the BOJ’s readiness to ease again, either by accelerating asset purchases or pushing rates deeper into negative territory, if needed to hit its 2 percent price target.
But he added that current negative rates would have a “very powerful” stimulus effect on the economy by driving down borrowing costs and nudging firms into boosting investment.
“Now is the time to carefully scrutinize how the effect (of the negative rate policy) will spread to the economy,” Kuroda said, when asked whether the BOJ was ready to push rates deeper into negative territory.