Kuroda Concerned over Excessive Drop in Long-Term Rates

November 14, 2017

Tokyo- Bank of Japan Governor Haruhiko Kuroda expressed his concerns on Monday over negative effects on the economy from an excessive fall in long-term interest rates in Japan, according to the text of a speech he delivered in Zurich, Switzerland.

"An excessive decline in long-term and superlong-term interest rates may give rise to concerns about the rates of return on insurance and pension products, which may have a negative impact on the economy through a deterioration in people's sentiment," Kuroda said, according to the text, which was released by the BOJ on Tuesday.

The remarks represented his opposition to BOJ Policy Board member Goshi Kataoka's proposal at the central bank's policy-setting meeting in late October for launching additional monetary easing steps to lower long-term interest rates further.

At the meeting, the BOJ decided to keep its current monetary easing policy unchanged.

In the speech, Kuroda said that "reductions in short- to medium-term interest rates have the largest impact on economic activity and prices."

On longer-term interest rates, he said that "if the central bank lowers interest rates too far, the banking sector's capital constraint tightens through the decline in net interest margins, impairing financial institutions' intermediation function." Jiji Press