Investing.com - Bank of Japan board member Takahide Kiuchi Thursday warned against side-effects of the negative interest rate policy and argued that 2% inflation that the bank is trying to achieve is too high for Japan's near-zero growth potential.
The BoJ's new easing tool of charging 0.1% interest on a part of excess reserves deposited by lenders at the BOJ "may have additional negative effects on financial institutions' profits, mainly through a narrowing of interest rate margins on loans and a reduction in yields on financial assets, and this potentially could undermine financial system stability," he said.
He also said the BoJ's inflation target adopted about three years ago is well above the level that is consistent with the growth potential of Japan's economy, which is estimated to be below 0.5%.
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Therefore, it is difficult at this point to achieve the 2% price stability target in a stable manner through monetary policy alone, unless further progress is made in economic structural changes that would increase the underlying trend in inflation," he said.