FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda takes questions from reporters at the annual meetings of the International Monetary Fund and World Bank in Washington, U.S., October 18, 2019. REUTERS/James Lawler Duggan/File Photo
Indeed, BOJ Governor Haruhiko Kuroda emphasized last week that he saw no need to deepen negative interest rates now. Last month, it decided to pay 0.1% interest to financial institutions tapping its crisis-response lending program. That led to a surge in participating lenders. While negative rates apply to only a small portion of banks’ reserves, they crushed already-narrowing profit margins at weaker regional banks. The BOJ warned in April that dwindling profits had driven banks into taking on more risk, enough to potentially destabilize Japan’s banking system.
The Bank of England also appears hesitant, although it has been less full throated than the Fed in shooting the idea down. Governor Andrew Bailey said last week the BoE is not considering taking “the very big step” of pushing interest rates below zero, but that was undercut days later by the bank’s chief economist telling the Daily Telegraph the central bank was looking at the idea at the idea “with somewhat greater immediacy.
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