Central bankers stuck in brave new world

Governor Haruhiko Kuroda of the Bank of Japan said he saw “ample space” for further loosening of the institution’s monetary policy, as he defended the central bank’s attempts to bolster growth and inflation via policies including negative rates.

The BOJ wrongfooted markets in January when it set a minus 0.1 per cent rate on some deposits that banks place at the central bank.

Mr Kuroda said the BoJ’s easing efforts including negative interest rates amounted to an “extremely powerful” policy scheme, adding that the central bank would take further action without hesitation if it was necessary to achieve its price stability target.

The former Federal Reserve Bank of Richmond economist wrote back in 1999 that negative rates were a feasible option years before central banks started actually experimenting with them.

The notion of negative rates is apparently being viewed with scepticism by the Fed, as shown by Ms Yellen, who made no mention of negative rates in her discussion of future policy options.

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