Haruhiko Kuroda speech highlights: Further BoJ rate cut?

At it's speech on Monday, Haruhiko Kuroda stressed that BoJ has further room to ease policy if needed. But will the Bank use the same old measures again cutting head on into deeper negative interest rate? Will we see further BoJ rate cut?

05 September, AtoZForexBank of Japan (BoJ) Governor Haruhiko Kuroda hinted on Monday the Bank’s readiness to ease monetary policy further. This could be achieved using either existing or new policy tools as the Governor acknowledged the downsides of BoJ negative interest rates.

Kuroda speech highlights: BoJ rate cut 

In contrary to some market participant expectations, Mr. Kuroda also pointed out that he won’t cut back on easing at the BoJ's comprehensive assessment of its monetary policy later this month.

However, the BoJ negative interest rate policy could impair financial intermediation and possibly stability, hurting public confidence in Japan's banking system.

"Even within the current framework, there is ample room for further monetary easing ... and other new ideas should not be off the table," Kuroda said in his speech.

"There may be a situation where drastic measures are warranted even though they could entail costs," he added, pointing that the BoJ should "always prepare policy options."

Growing scepticism is BoJ policy working

The Bank of Japan has already swallowed one third of Japan's bond market and faced criticism for thin profit margins.

It would be logical for the BoJ to consider new modifications to its policy framework. Yet, Mr. Kuroda stressed that monetary policy has yet to reach its limit, implying that the Bank had scope to deepen negative rates head on.

"There is no free lunch for any policy, Mr. Kuroda noted. "That said, we should not hesitate to go ahead with (further easing) as long as it is necessary for Japan's economy as a whole."

Economists expect the BoJ to lower its minus 0.1% rate, or increase its ¥80 trillion ($770 billion) purchase program of Japanese government bonds, or do both.

The governor concluded that a radical measures such as helicopter money can’t be done legally and should not be done anyway.

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