Sep 07, 2019 (Nikkei) - Cutting interest rates "further into the negative zone is always an option" for the Bank of Japan, Gov. Haruhiko Kuroda told Nikkei, as the central bank grows increasingly concerned about mounting downside risks to the global economy from the U.S.-China trade war. He said rate cuts are one of the four options BOJ has presented before.
In its statement after July's policy board meeting, the BOJ had signaled a willingness to consider preemptive easing if necessary. "The Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost," the statement said. Kuroda suggested in an interview Thursday that circumstances have not worsened enough to merit such steps at this point. He maintained a bullish stance on Japan's economy, asserting that "we're maintaining momentum toward the price stability target" of 2% inflation and that "domestic demand -- consumer spending and capital investment -- are relatively firm."
But he stressed that "caution is needed" in light of unpredictable conditions overseas, particularly with regard to the trade war.
While saying he considers it unlikely that the U.S. will enter a serious recession, Kuroda noted a slowdown in the global economy, centered on Europe and China.
"I can't rule out the possibility that it will worsen further," he said.
The U.S. and the European Union are starting to change course on monetary policy after moves toward tightening. The Federal Reserve cut interest rates for the first time in more than a decade in July, and the European Central Bank is widely expected to take steps in the same direction at this month's meeting.
The BOJ, meanwhile, implemented a massive easing program more than six years ago under Kuroda and has kept policy loose since. The bank has laid out four policy options it can take in the event of a turn for the worse: cutting the short-term policy rate, lowering its target for long-term rates, stepping up asset purchases and accelerating expansion of the monetary base.
