BOJ Kuroda Says Negative Rates Should Boost Markets After Market Embraces Risk

Bank of Japan Governor Haruhiko Kuroda said Monday that its negative interest rate policy should boost stock prices and weaken the yen, but its effects are currently outweighed by excessive risk aversion in financial markets.

Speaking at a forum in Tokyo, Kuroda said Japanese economic fundamentals are strong, adding that the BOJ will carefully monitor how its policy filters into the real economy.

“The policy works in the direction of raising stock prices and lowering the value of the yen. At the moment, these effects are being outweighed by the excessive risk aversion among investors around the globe,” Kuroda said in his speech.

“However, given the strong fundamentals of Japan’s economy and those of Japanese companies, and that the negative interest rate policy will have a powerful effect, financial markets will turn positive as investor confidence returns,” Kuroda said.

The BOJ surprised financial markets with its decision in late January to adopt a negative interest rate policy amid growing concern that falling oil prices and slowing emerging economies may hamper its efforts to achieve a 2 percent inflation target.

The negative rate policy is designed to benefit households and companies, Kuroda said, while also maintaining that he expects to soon see a positive effect on housing investment and financing by companies.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza