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Will scrutinize the impact of negative rates on money market –BOJ’s Kuroda

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 7, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    While addressing a Business Group today, BOJ Governor Mr. H. Kuroda said that the central bank will scrutinize the impact of negative rate policy on money markets.

    Key Quotes:

    Wants to dispel concerns that QQE cannot be expanded further

    Cannot deny that QQE with negative rate has an adverse effect on financial institutions' earnings

    Aim of QQE with negative rate is to benefit households, firms and ultimately to fully overcome deflation

    By making full use of QQE with negative rate, BOJ will achieve 2 pct inflation at earliest possible time

    Deflation will not return, 2 pct inflation target will definitely be achieved

    Negative rates offer big benefits to individuals and corporates

    Decline in lending rates is clearly larger than decline in savings deposit rates

    Low interest rate environment will hurt bank earnings over long run

    Additional comments from Kuroda via Reuters:

    Japan banks are very healthy, have solid capital base

    Decline in yen interest rates and fact further easing is possible have positive impact on asset prices

    Japan banks still able to secure high earnings due to econ recovery

    Current policy has effect of raising stock prices, lowering yen but these effects now being outweighed by excessive risk aversion

    Fundamentals of Japan's economy and Japanese firms remain strong

    Given competition to extend loans, it is difficult for Japan banks to raise lending costs

    Escaping deflation is the only way to improve banks' earnings

    Decline in Chinese stock prices can be seen as correction of bubble rather than sudden deterioration in China's fundamentals
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