Bank of Japan paves the way for more monetary stimulus

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Japan's financiers don't seem to believe the Bank of Japan governor when he insists an avalanche of new policies are waiting in the wings
Japan's financiers don't seem to believe the Bank of Japan governor when he insists an avalanche of new policies are waiting in the wings (Source: Getty)

Bank of Japan (BoJ) chief Haruhiko Kuroda has insisted he has plenty of ammunition left to fire up the Japanese economy in a robust defence of the Bank's twin policies of negative interest rates and quantitative easing.

In a defiant speech early this morning, Kuroda said the BoJ had "ample room for more monetary policy easing", insisted "new ideas should not be off the table", and said he sees no limit to how far the Bank can slash rates or print cash to stoke inflation and growth.

The Bank has kept markets on their toes as to the prospect of when - and if - it will unleash a new round of monetary stimulus. After slashing interest rates to minus 0.1 per cent earlier this year, the BoJ has routinely underwhelmed, with the yen continuing to strengthen against the dollar.

Insisting the Bank stands ready to act, Kuroda said: "There is still ample space for further cuts in the negative interest rate ... The Bank has a broad range of policy options ... we should not hesitate to go ahead with it as long as it is necessary for Japan's economy."

Read more: Ratings agencies blasts negative rates as "damaging and desperate"

Analysts said the comments were some of the strongest indications yet the Bank could increase the size of its ¥80 trillion (£581bn) a year quantitative easing programme or take interest rates further into negative territory at one of three meetings it has scheduled for the rest of the year.

"Governor Kuroda doesn't seem to be done with easing monetary policy yet," said PhillipCapital market analyst Nathan Sage.

Ipek Ozkardeskaya, senior market analyst at London Capital Group added he was optimistic the BoJ would act after it "showed signs of flexibility to adapt to new policies."

However, he added that "the size of a future stimulus package could not suffice to satiate investors' appetite."

The markets, as has become the customary reaction to words from the BoJ, seemed not to buy Kuroda's message. The yen strengthened by 0.6 per cent to ¥103 against the US dollar - with stronger currencies usually implying expectations of tighter than forecast monetary policy.

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