NAGOYA, Japan (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Monday the central bank was aware that prolonged ultra-loose monetary policy could squeeze…
NAGOYA, Japan (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Monday the central bank was aware that prolonged ultra-loose monetary policy could squeeze financial institutions‘ margins and potentially destabilize the country’s banking system.
Given subdued inflation and uncertainty surrounding overseas economies, however, he said the BOJ needed to maintain its massive stimulus programme while keeping a watchful eye on the merits and costs of its policy.
„The BOJ fully recognizes that, by continuing monetary easing, financial institutions‘ strength will be cumulatively affected,“ Kuroda said in a speech to business leaders in Nagoya, central Japan.
Japan’s banking system could destabilize in the event of a severe negative shock, if financial institutions more actively take on risk to make up for narrowing margins from years of low interest rates, he said.
„Although these risks are judged as not significant at this point… the BOJ will scrutinize developments and encourage financial institutions to take action as necessary,“ he said.
