[ad_1]
News and research before hearing about CNBC and others. Claim your free 2 week trial at StreetInsider Premium right here.
By Leika Kihara
NAGOYA, Japan (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Monday that the central bank was aware that a very loose and prolonged monetary policy could reduce the margins of financial institutions and potentially destabilize the country's banking system.
In view of controlled inflation and the uncertainty surrounding overseas economies, however, he said the BOJ needed to maintain its massive stimulus package while keeping a close eye on the benefits and rewards. costs of its policy.
"The BOJ is fully aware that, by continuing monetary easing, the strength of financial institutions will be affected cumulatively," Kuroda said in a speech delivered to business leaders in Nagoya, Japan. the center of Japan.
The Japanese banking system could be destabilized in the event of a severe negative shock, if financial institutions took the risk more actively to offset the reduction in margins resulting from years of low interest rates, he said.
"Although these risks are considered insignificant at this stage (…), the BOJ will closely monitor the situation and encourage financial institutions to take the measures that are required", a- he declared.
Kuroda's remarks came after the minutes issued earlier on Monday had shown the nine-member BoJ board discussed the rising cost of a prolonged easing when revising its rate in September.
"One member said that it was possible to soften the political framework of the BoJ in the future" if the economy continues to develop, the minutes showed.
Another member said that the board should discuss how long the BOJ can maintain its stimulus program, given the perceived limitations of the duration of its policy, showed the minutes.
As the BOJ looks at the financial risks of easing, it will also need to take into account the uncertainties surrounding Japan's economic outlook, as Sino-US trade frictions and increasing protectionism could weigh on global demand, said Kuroda.
"The impact of such problems on the Japanese economy is limited at the moment," Kuroda said. "But if the problems persist, the impact on the Japanese economy could increase," he added.
"It is necessary to continue persistently with a strong monetary easing, while considering the positive effects and the side effects in a balanced way," Kuroda said.
Controlled inflation has forced the BOJ to maintain its radical stimulus program despite growing disadvantages, such as the profits of financial institutions on prolonged low rates.
The BOJ maintained the stable monetary policy last month and Kuroda ruled out a rise in short-term interest rates given the risks associated with global trade disputes.
(Additional report by Stanley White in Tokyo, edited by Chang-Ran Kim and Sam Holmes)
[ad_2]
Source link
