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Impact Of BoJ's Negative Rates Will Take Time, Say Japanese Officials

Impact Of BoJ's Negative Rates Will Take Time, Say Japanese Officials

Bank of Japan Governor Haruhiko Kuroda told the government's top advisory panel that it will take time for its negative interest rate policy to have an impact, a Reuters report said citing Economy Minister Nobuteru Ishihara.

In January, the BoJ stunned the market by adopting a negative interest rate policy to boost lending and inflation. However, there are enough doubts over the extent of impact the negative interest will have on the economy.

The report said Kuroda told the panel that the BoJ's -0.1 percent interest rate will initially apply to only 10-20 trillion yen of commercial banks' reserves.

The BoJ's next policy meeting ends on March 15, and there are lingering doubts about how far the central bank can take rates into negative territory.

Related Link: ECB Continues Down Rate Reduction Road

The BoJ is also buying 80 trillion yen ($702.74 billion) of government debt per year as part of its efforts to meet its 2 percent inflation target and avoid a return to the deflation.

Thursday, the European Central Bank (ECB) stunned investors with three-pronged cut in interest rates and expansion of its bond-buying program. The ECB trimmed the interest rate on the main refinancing operations of the eurozone by 5 basis points down to 0.00 percent. The interest rate on the marginal lending facility has been cut by 5 basis points to 0.25 percent. In addition, the interest rate on the deposit facility will be decreased by 10 basis points to -0.40 percent.

The ECB also expanded the monthly purchases under the asset purchase program to €80 billion starting in April. The current rate is €60 billion.

Image Credit: Public Domain

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