Bank of Japan Deputy Governor Hiroshi Nakaso indicated the central bank is prepared to take its benchmark rate deeper into negative territory, though not immediately.
“We have designed a policy that technically allows us to cut the level further,” Nakaso told reporters in Okinawa Thursday, referring to a minus 0.1 percent interest rate policy the central bank adopted in January. “I can’t say anything concrete at this point” on how low the rate could go, he said.
Nakaso, a career BOJ official tapped by Prime Minister Shinzo Abe as one of Governor Haruhiko Kuroda’s two deputies, also said that financial markets need time to digest the unprecedented negative-rate policy. It took effect Feb. 16.
“Some more time is needed for financial markets to digest the policy and for us to measure the impact of it,” said Nakaso, who is a former director at the BOJ’s markets section.
The BOJ has faced a backlash against the Jan. 29 decision to charge commercial banks on a share of the cash they park at the central bank. The reaction has cast a cloud over the BOJ’s next policy meeting, scheduled for March 14-15.