Kuroda Says Minus 0.5% Rate Is Theoretically Possible for Japan

Haruhiko Kuroda.

Photographer: Kiyoshi Ota/Bloomberg

The Bank of Japan has quite a lot of room to cut its key interest rate further and theoretically it could go to minus 0.5 percent, Governor Haruhiko Kuroda said in parliament Wednesday.

While the BOJ kept policy unchanged on Tuesday, Kuroda underscored in a press conference a readiness to move on any of three fronts: a reduction in the present minus 0.1 percent rate, an acceleration in boosting the monetary base or an expansion in purchases of riskier assets.

Questioned by a lawmaker in parliament Wednesday, he agreed that it would be theoretically possible to lower the rate to minus 0.5 percent.

With the BOJ far from its 2 percent inflation goal and economic growth stalling, most analysts have seen additional stimulus as just a matter of time. The stakes are rising for Kuroda, with household and corporate sentiment waning and investors questioning whether monetary policy is reaching its limits.

Economists surveyed by Bloomberg have judged that a further cut to the negative-rate policy is the most likely tool. Kuroda said Tuesday that he doesn’t need to wait to see the full impact of the negative rate before acting again, if change is needed.

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