BOJ Minutes Show Members Want Research on Impact of Negative Rates

Some Bank of Japan board members said the central bank needed to examine the impact of its negative interest rate policy on the real economy in their meeting in mid-June, when expectations were growing in the financial market for additional easing measures, minutes of their policy meeting showed Wednesday.

Some members also agreed in their June 15-16 meeting on the need to carefully monitor the impact on the financial market of Britain’s referendum on European Union membership a week later, it said.

“Some members agreed that, while effects of the negative interest rate policy already had been seen…, the bank needed to examine the extent of the spread of policy effects to the real economy, and thus it should continue with the current monetary policy,” the minutes said.

On June 16, the yen surged to a nearly two-year high against the dollar shortly after the meeting’s results were released, with central bank’s inaction disappointing the market.

Following the policy board decision then, BOJ Governor Haruhiko Kuroda warned that a strong yen would negatively affect the world’s third-largest economy. A strong yen hits Japanese exporters by reducing their overseas profits when brought back home, and could complicate the central bank’s efforts to achieve its 2 percent inflation target.

On the back of accommodative financial conditions, members expressed the view that business fixed investment and housing investment were on the rise. One member said bank lending had not accelerated, and the effects of the BOJ’s policy were not clearly evident.

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