Bank of Japan governor Haruhiko Kuroda is going all out to ensure markets understand that the bank can, and will, cut interest rates further into negative territory should the need arise.
Speaking at a seminar earlier today, Kuroda delivered a Mario Draghi-like address to the audience, describing last week’s decision to adopt a negative interest rate policy as “the most powerful monetary policy framework in the history of modern central banking”.
Even with that belief, Kuroda went further, suggesting that even larger and more innovative forms of monetary policy could be delivered in order to achieve its medium-term 2% inflation target.
“If we judge that existing measures in the toolkit are not enough to achieve (our) goal, what we have to do is to devise new tools,” said Kuroda. “I am convinced that there is no limit to measures for monetary easing.”
Keeping his cards close to his chest, the BOJ governor provided no indication as to what circumstances would warrant an even more aggressive, and innovative, policy stance.
However, as was the case in the bank’s January monetary policy statement, he noted that recent volatility across financial markets could negatively impact confidence, both for business and consumers.
According to Reuters, Kuroda also countered criticism that the bank was running out of ammunition to accelerate the nation’s core inflation rate – something that rose just 0.1% in the 12 months to January – saying negative rates won’t hamper its efforts to gobble up government bonds.
Despite the aggressive tone from Kuroda, Japanese markets – unlike last Friday – are having a tough session on Wednesday.
The Nikkei 225 is off 2.80% at 17253.35 while the USD/JPY has fallen back below the 120 level, currently trading at 119.62.
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