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Bank of Japan Policymakers Feared Negative Rates War, Hit to Bank Profits

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Policymakers at the Bank of Japan tussled over the decision to adopt negative interest rates, raising a slew of concerns ahead of a close vote, according to the official summary released Monday.

Blindsiding global financial markets on January 29, the BOJ adopted negative interest rates for the first time ever, buckling under pressure to revive growth in the world’s third-largest economy. It was a close call, with five members voting for negative interest rates and four against the surprise move.

“I am concerned that the Bank’s introduction of a negative interest rate could lead to a competition with central banks in other countries, which already have adopted negative interest rates, to lower interest rates deeper into negative territory,” one member said, according to the summary of opinions at the monetary policy meeting.

Members submit a summary of their opinions to BOJ Governor Haruhiko Kuroda, who edits them before their public release. Individual members are not identified in the release.

Concerns over whether central banks would compete for the easiest policy aren’t new, with many analysts raising the possibility over the past six months or more of a “currency war” to achieve the weakest exchange rate. A weaker currency offers countries benefits in the form of more competitive exports.

CNBC

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.
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