Bank of Japan’s Kuroda sees the other side of negative rate

TOKYO—Bank of Japan Gov. Haruhiko Kuroda on Monday acknowledged the downsides of his negative-interest-rate policy, suggesting caution about further reductions in rates.

Mr. Kuroda, speaking at a seminar in Tokyo, said negative rates particularly hit the profits of financial institutions while low long-term yields hurt some other businesses by forcing them to put aside more money for long-term pension obligations.

The central bank must consider “that such developments can affect people’s confidence by causing concerns over the sustainability of the financial function in a broad sense, thereby negatively affecting economic activity,” Mr. Kuroda said.

However, Mr. Kuroda also ruled out a retreat on the monetary easing he has carried out for more than three years. “A reduction in the level of monetary policy accommodation, which is being called for by some market participants, will not be considered” in a policy review now under way, he said.

Markets reacted relatively calmly to the speech, with the yen rising slightly against the dollar on the perception that Mr. Kuroda was likely to hold off from further rate reductions. The Nikkei Stock Average held on to the morning’s gains and was up about 1%.


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